Laplace, Louisiana (PressExposure) October 21, 2011 -- "Sanwa Holdings" have told clients that the recent fall in the price of gold should not be a cause for concern.
The last two weeks have seen the price of gold under considerable pressure as fears over both the European debt crisis and the slowing global economy stoke investor fear and a flight to so-called "quality" represented by the US dollar.
A strategist at "Sanwa Holdings" said, "There is nothing permanent about these price falls. It's simply a case of investors selling gold and silver to meet margin calls in other markets like equities and foreign exchange."
Gold is in the 11th year of a bull market, the longest winning streak since at least 1920 in London. Futures reached a record $US1,923.70 on Sept. 6 as investors sought to diversify away from equities and some currencies. Central banks are adding to reserves for the first time in a generation, joining billionaire investors including John Paulson in hoarding gold.
Investors are selling riskier assets like equities and commodities as the prevarication among European leaders over the best way to draw a line under the sovereign debt crisis continues.
"The selloff is, in part, due to new margin requirements imposed by the CME Group, owners of the Nymex commodities exchange. Basically, what this means is that investors wishing to speculate in the price of gold now need to put down larger deposits and this caused speculators to close positions by selling their contracts," said Angelo Cerutti senior vice president at Sanwa Holdings.
He suggested that clients should regard price falls as an opportunity to acquire more of the precious metal.
"Sanwa Holdings" says it does not expect a fundamental shift in the fortunes of the US dollar and maintains its bearish stance on the world's reserve currency.
"Sanwa Holdings" believes that further quantitative easing will only be announced if the US economy moves closer to a double dip recession, and said that, despite the selloff, it has not changed its outlook for gold and silver prices. "We still expect gold to reach $2000 by the end of the year and we see silver returning to the $50 an ounce level," remarked one of the firm's metals researchers.