Gold’s year-end rally surprises investors

Gold’s year-end rally surprises investors

Risk aversion among year-end buyers and short covering boosted gold prices in the last days of 2014, but the rally could be short-lived, with the stronger dollar keeping a lid on further gains, experts warn.

The precious metal, in fact, is ending the year nearly unchanged after plummeting about 30% in 2013.

After closing Tuesday at $1,200 an ounce, spot gold fell in New York during Wednesday morning and recovered a bit at noon, trading at $1,189.30.

Gold’s year-end rally surprises investors

Live gold prices by Kitco.com

“Geopolitical tensions could bring gold back up,” Donald Selkin, the chief market strategist at New York-based National Securities Corp., which oversees $3 billion told Bloomberg. “Central banks will probably start buying, and prices are getting close to production costs. China could loosen its monetary policies to boost the economy.”

The precious metal was extremely volatile this year. All ups and downs considered, gold fell only 0.6% when compared to an average annual move of 12% in the past 14 years. Prices touched a four-year low in November as the dollar strengthened and investors bet on the Fed planning to hike interest rates.

Despite being on the way down for two years now, some believe that $1,200 will be the new normal for the precious metal in 2015.