Gold – Is It Still Worth Buying?

After a strong year in 2011, with gains registered at roughly 15 per cent in just 12 months, gold has been forecast to average $1,850 a troy ounce for 2012 and 2013 by HSBC. The question now hangs: Is gold - long considered a safe haven to guard one's assets - still worth buying?

The answer could still be yes.

"For investors who have a strong opinion on where gold is headed, or for traders looking to make a quick return, there is a wealth of options available. Perhaps the most direct method comes from the February GC Gold futures contract offered on the COMEX. The February contract is currently the most heavily traded future and will offer the best liquidity," Jared Cummans wrote on www.seekingalpha.com.

Cummans could be right. At 1:40 p.m. Thursday on the Comex in New York, gold futures for February delivery gained 0.5 per cent to reach $1,620.10 an ounce. The most active contract jumped for the fourth straight session, its longest rise since late October.

The HSBC as well as a host of other economists and analysts said they remain bullish on the yellow metal. A poor global economic outlook and sovereign debt troubles will definitely continue to push fresh demand for bullion as an alternative store of value, they said.

For as long as the world and its people fear the future and what could possibly happen next, what with the global concerns over the eurozone and Iran's nuclear programs, to name just a few, gold acquisition will continue to leverage on that emotion.

"Gold is gaining on the fear," Michael Smith, president of T&K Futures and Options in Port St. Lucie, Fla., told Bloomberg News.

In just 31 days, prices of the precious metal fell 10 per cent in December, from roughly $1,700 an ounce to as low as $1,545 an ounce, as investors opted to end 2011 and greet the new year 2012 with physical cash, especially the U.S. dollar, instead of precious metals for safety.

"People who were jittery about owning gold probably (cashed out) at the end of 2011," market strategist Adam Klopfenstein told The Wall Street Journal. "At these levels, it's regaining a little more investor interest."

Still, HCBS expects gold to average $1,850 an ounce this year, down from an earlier forecast of $2,025 an ounce. The bank also reduced its average 2013 forecast to $1,800 an ounce, from $1,850.