Gold: Entering 2013 with a stable stride

The precious metal has again gotten the needed boost from all corners of the world. After an erratic spell that lasted as long as the moot over the fiscal cliff, gold prices stabilized a tad once the last-minute deal on the fiscal cliff was reached. Prior to that, speculations about a possible recession in the US economy had been weighing heavy on the precious metals prices.
Once again, gold has gotten more golden as the latest monetary policy meetings of the European Central Bank (ECB) and the Bank of England (BOE). The two influential institutions announced an accommodative monetary policy stance, keeping a status quo for the respective benchmark interest rates.
Conventionally, the metal rallies following bearish monetary policy announcements by major institutions such as the Fed and the ECB, as gold is largely believed to be allergic to inflation and to hawkish monetary policy decisions, as it becomes a more promising investment in times of low interest rates.
At the same time, besides the optimism over the resolution of the fiscal cliff, the US also helped push up gold prices on similar grounds to the euro zone. Lackluster jobs data and a resilient 7.8 percent unemployment rate in the US in December kept gold bears on hold due to expectations of continued monetary easing from the Fed.
And when the worlds largest economy is doing its bit in propping up gold prices, the second largest economy also followed suit. Chinas healthy trade and export data helped gold climb higher last week, as the country is the second-largest consumer of gold.
Going forward through 2013, gold is expected to continue to shimmer, thanks to signs of stronger physical buying around the world.
"China, owner of the worlds largest foreign exchange reserves, may increase gold holdings to diversify away from the US dollar... As China aspires to take the lead politically and economically, it is unlikely to be satisfied with storing its wealth simply in liabilities of other countries," the Bloomberg quoted a research on the metal last Friday.
In addition, golds appeal as a hedge against currency devaluation is also believed to lend its support in 2013.
However, no astounding boom in gold prices is expected in the coming months, unless a drastic economic turnaround in key economies - US and the eurozone - or key gold consumers - India and China - takes place.