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Unformatted text preview: China holds the key to future increases in gold prices By David Hale The recent gold price rally is the first stage of a multi-year bull market that will drive the gold price to at least $2,000 an ounce by 2015. A mixture of economic factors and innovations in how institutions can purchase the metal has moved prices. But the biggest driver of gold prices is yet to come. First, a recap of the factors that have taken gold prices to present levels. The economic causes centre on monetary policy and the risk of inflation. Some industrial countries are striving to devalue their currencies and will use monetary policy to support the goal. Japan has spent $24bn on unsterilized intervention trying to weaken the yen. The policy succeeded, albeit briefly. In 2003-04, Japan spent more than $350bn on intervention and could easily do so again. This policy would increase dollar liquidity while nurturing more monetary growth in Japan itself. The Federal Reserve has also been dropping ever bigger hints that it will embark on a policy of further quantitative easing. A significant policy move will trigger immediate selling of the dollar, and could set the stage for competitive devaluations elsewhere....
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- Spring '11
- Monetary Policy, foreign exchange reserves, Federal Reserve System