Will gold step up a gear?

As forecasted, gold has maintained its growth momentum in 2011, touching a record high level of around $1,895 per ounce in September. With prices currently hovering around $1,606 per ounce, the metal has fallen by around 15 percent from a record high level. But, it is still 14 percent higher compared to the last years closing price. The glittering metal has registered an average 17 percent annual growth in the past eleven years. Since the metal is rising for the eleventh consecutive year in 2011, and given that factors which were responsible for gold rally in the past few years are still present, gold lovers strongly believe that the bull market is still intact. A combination of lower interest in US, fiscal woes across EU region and official sector buying, signals gains for the precious metal in 2012. Lower interest rate makes the opportunity cost of holding the precious metal negligible. Inflationary pressures will continue to boost demand for the yellow metal as an alternative store of value. Above and beyond, central banks bought around net 250 tons of gold in 2011, according to data compiled by The World Gold Council. Hence, the analysts assert that fundamentals supporting the metal are strong enough to help the metal cross its previous peak level- which is close to $1,900 per ounce - in 2012. Deutsche Bank forecasted that the gold will reach $2,100 per ounce in 2012, while BNP Paribas expects gold to average $1,775 per ounce in 2012. The SPDR Gold Trust, the worlds largest gold-backed exchange-traded fund, has witnessed outflows - with gold holding falling to around 1,254 tons by December 23, from 1,280 as of December 31 Although least expected, caution is urged for investors interested in metal buying since the market might see unwelcome developments for gold, arising from delay in further quantitative easing in US , better than expected US economic data, and slowdown in Chinese economy in 2012.