Experts on global gold prices

CNC report from Brussels
Added On May 5, 2013

After downward trends and a sharp sag in mid April, prices of gold are picking up again.

Some analysts say the uptick is caused mostly by investors taking advantage in lower price.

Still, they are confident that gold prices will continue to stabilize, however at much lower levels.

Peter Vanden Houte, Chief Economist from ING Bank, says gold prices in long term will fluctuate around the current values.

"I think that gold basically in the coming years will show slightly upwards trends, given the fact that we do not expect central banks to tight monetary policy very soon, so interest rates will remain extremely low and that might be a reason to diversify some of the assets towards gold. I think there was perhaps a bit of over evaluation of prices in 2012, but around the current levels most probably we are around the level that might be sustainable."

The report published by World Gold Council shows demand sank across regions and across methods to invest in the precious metal.

Germany and Switzerland, two of Europe's biggest gold-buying nations, reduced purchases of gold bars and coins by half.

But investments in gold remain strong in India and China.

"China and India have always been traditional investors also for jewelry. But there have been quite some interesting in Europe of the last few years, especially as a kind of diversification. In 2012 in gold reaching nearly 800 dollars per ounce that was clearly bubble territory and based only on the fear that eurozone would fall apart. Now that this fear has disappeared partially, gold has also dropped."

Experts also point out that a drop in gold prices might signal rising investors' confidence in economy and push them towards real investments.

"That would be a good news that if indeed the price of gold is falling, if it is showing that people are less afraid about the future and willing to invest again in real economy ,then the falling price of gold is good news. And to some extend we have seen that since I would say September, October last year that there has been a rotation towards the stock market that people were again willing to invest in equities and have been selling gold, so the falling the gold prices might also be a good news if it indicates that people are fearing the crisis less that before."

Vanden Houte adds despite the recent price fluctuations, gold would always be an interesting and safe alternative in investments.

"We see that all of the world, the number of triple A bonds are declining. So if you need a fly to quality, fly to safety there are not that many alternatives, so that it means that there will still be interest in gold. If you also know that central banks all over the world continue with quantitative easing. So they continue to print money, that might also be reason for people to invest some of they money in gold."

Zsolt Darvas from think-tank Bruegel Institute echos Vanden Houte's opinion.

"In the global market, there is a major search for safe assets and there are only a few countries can afford that like: US, Germany, Austria, the UK etc. But there is much higher demand for safe assets and when there is a shortage of demand, then investors look for similar assets which they regard safe and certainly gold is one of that."

As investments in gold do not accumulate interest or pay earnings, economists emphasize that it should be looked at as an insurance against financial turmoil instead of a holding to produce financial growth.