Why gold miners are set for further gains

The gold price seems likely to hit $1,000 an ounce. That's good news for gold miners - higher prices mean higher profits. But there's another reason investors stand to profit from the sector...

It is our view that gold bullion is probably headed to $1,000oz and on that basis we would want the portfolios to remain exposed to what we believe to be a very considerable investment opportunity.

In the long-term, on average, one ounce of gold bullion purchased sixteen barrels of oil, currently that ratio is only 8.6 times. Assuming oil remains at $60 a barrel should we return to the long-term average ratio, it would mean gold bullion priced at $960oz. Since the end of the Bretton Woods agreement in 1971, the Dow/gold ratio has averaged 12.5 times. Applying the current Dow price of 11,000 therefore, implies a gold price of $880oz.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free
https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up
MoneyWeek

MoneyWeek is written by a team of experienced and award-winning journalists, plus expert columnists. As well as daily digital news and features, MoneyWeek also publishes a weekly magazine, covering investing and personal finance. From share tips, pensions, gold to practical investment tips - we provide a round-up to help you make money and keep it.