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While the price of gold has risen tenfold over the past five years most analysts still feel that the price will continue to rise in the short to medium term. Standard Chartered, BNP Paribas and Morgan Stanley all foresee the forward gold price rising to over $2,000 per ounce in 2013 and 2014 and staying there until well into 2015.

Several underlying macroeconomic factors support these forecasts and expectations: The gold price is inversely driven by global liquidity and real interest rates, especially in developed economies, and poor liquidity over the medium term should continue to see the demand for gold hold strong.

World economic instability and the erosion of value through fiscal easing in the reserve currencies still shows no sign of letting up.  In addition the inflationary effect of increasing the money supply in the USA and Europe will start to exhibit negative symptoms in 2013 and the following two to five years. 

Angela Merkel recently stated that she expects the current negative conditions in the Euro-zone to take up to five years to resolve and for consistent economic growth, liquidity and prosperity to return to the EU market.

Strong underlying industrial demand for gold still exists, which will grow through demand from emerging economies.

Investment demand in gold from China and India is expected to continue as middle classes in those countries grow. In addition BRIC central banks (Brazil, Russia, India and China) are stockpiling gold. The trend is solid in medium term but cannot be expected to continue in the long term.  The general conclusion therefore is that high gold prices are here to stay at a level of between $1,500 and $2,250 per ounce over the coming 24-36 months.