From FT.com:
The recent gold price rally is the first stage of a multi-year bull market that will drive the gold price to at least $2,000 an ounce by 2015. A mixture of economic factors and innovations in how institutions can purchase the metal have moved prices. But the biggest driver of gold prices is yet to come.
First, a recap of the factors that have taken gold prices to current levels.
The economic causes centre on monetary policy and the risk of inflation. Some industrial countries are striving to devalue their currencies and will use monetary policy to support the goal. Japan recently spent $24bn on unsterilised intervention trying to weaken the yen. The policy succeeded, albeit briefly. In 2003-04, Japan spent more than $350bn on intervention and could easily do so again. This policy would increase dollar liquidity while nurturing more monetary growth in Japan itself.
The Federal Reserve has been dropping ever-bigger hints that it will embark on further quantitative easing. A significant policy move will trigger immediate selling of the dollar, and could set the stage for competitive devaluations elsewhere......read on
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