2013 has been a rather bad year for gold prices, with the precious metal losing $200 in April alone, following a suspicious dip. Even though a correction occurred soon after, overall, gold is trading at less than $1300 per ounce, almost $500 short of the values of 2012. After the optimists were proven wrong by the market and those who expected gold to surge above $2000 this year were disappointed, there are finally some good reasons to be confident in a new gold prices surge next year.
Potential Gold Drivers For 2014
Mining companies are trying to increase their output but just as some people fear that the so-called “peak oil” has been hit, there are some who worry that gold miners are becoming unprofitable. The truth is that if the gold price stays below $1250 for too long, mining companies can no longer afford to extract the precious metal. As a result, many of them will go bust and as they close down some of their operations, it is only fair to expect that demand will surpass the offer in 2014.
Speaking of which, the Chinese are purchasing gold at the same accelerated pace they did one year ago and it is most unlikely for the communist government to change its attitude in 2014. The bottom line is that with China being one of the biggest gold buyer in the world, the demand for the precious metal will remain the same while mining companies would have a hard time to provide. The Chinese are purchasing gold companies at a frantic pace and as they lose confidence in fiat currency, they will be willing to buy gold even if the prices spike.
Japan and India to Play a Big Part
When trying to determine whether gold prices will surge in 2014, analysts instinctively look at the current major buyers but tend to overlook potential customers. India for instance is purchasing much more gold than it did one year ago and even though the amounts are yet to reach the same levels as those recorded in China, this is a change to take seriously. The import tax on gold is higher than anywhere else, but the Indians are undeterred by the obstacle and purchase gold whenever they can lay their hands on it.
The fiscal policy in Japan has changed dramatically since Shinzo Abe became prime minister and inflation has crossed the 2% threshold. With Bank of Japan planning on printing more currency, the elderly citizens are concerned about the prospect of seeing their reserves losing their worth. Private and government pensions are at the highest levels ever and many of the retirees regard gold as a smart hedge against inflation.