By: Richard Evans, Telegraph – 6:16AM BST 12 Apr 2011
The price of gold will reach $2,100 an ounce within three years and could rise to almost $5,000 by the end of the decade, according to a new report.
Rising demand for gold in China and India will drive the precious metal’s continued bull run, analysts at Standard Chartered, the Asia-focused bank, predicted. They said low interest rates in America and a time lag before mines started supplying more gold would see the rally extend to at least 2014.
“Our base-case forecast is that prices rally to peak at an average of $2,107/oz in 2014, although our modelling suggests a possible ‘super-bull’ scenario of gold prices rallying up to $4,869/oz by 2020, should current relationships between Asian demand and gold persist,” the analysts wrote.
The bank said there was a “powerful relationship” between income per head in Asian emerging markets and the gold price.
The report added: “We expect some headwinds for gold to come from higher US [interest] rates, but we find that the impact of higher rates is rather muted and we do not expect this to derail gold’s rally for now,” they added. “More important, we believe, will be the impact of higher mine production. We expect a steady acceleration in mine-supply growth in the years ahead, which should overwhelm demand growth beyond 2014. Nevertheless, we expect an extended period of high gold prices.”
In a previous report, the analysts had predicted that average income per head in China and India would reach 30pc of the US level by 2030. “Under this scenario, and assuming that the relationship between rising income levels and gold holds, gold prices could reach $4,869 by 2020,” the report said.
“On this basis, the bull run for gold could still be in its infancy. This is based on the assumption that the current relationship between gold and incomes persists through to 2020, which is considered possible, but unlikely.”
The report concluded: “The bull run in gold is likely to continue for some time, but prices should peak around 2014 as supply finally catches up with demand and US real rates turn positive.”
All Things Considered – John’s Commentary:
Action to take: Too many of my clients and readers are trying to time the market. Don’t! It has not worked for our clients and readers in the past, as I speak with them daily. Only 1 in 10 end up buying at a lower price than that at the moment.
Nobody can successfully time the market – most especially the precious metals. Buy in modest amounts on regular intervals over time.
What to buy: Weight gold over silver, as gold has become cheap relative to silver.
Quote of the day: “The fate of the nation and the fate of the currency are one and the same.” – Dr. Franz Pick
