Gold bullion price action has been very encouraging, most recently exceeding $650/oz, above which we expect to see a sharp increase in buying. Some time in 2007 last year’s gold price high of $730oz should be tested and if that test is successful, then ‘yes’ it is quite possible that the all-time high of $880oz could be achieved. Whether or not it happens this year remains to be seen, but that it will actually happen at some time in the future, is we think, a dot on the card – a consequence of global liquidity and the lack of fear.
The bull market for gold bullion started in January 2001, since when it has very significantly out-performed the Dow Jones.
Portfolios hold either Black Rock Merrill Lynch Gold & General or Investec Global Gold Fund, these are investments in gold mining shares, which, over time, we expect to gain in value at a ratio to gold bullion of 3:1. As we have posed several times before, just contemplate gold bullion at $880oz and ponder what the value of these investments might then be, we would expect at least 100% up from current levels.
Gold investments: For a more in-depth look into the outlook for the gold market, see our recent cover story: Why you should hang on to your gold.
The long term outlook for the gold price is succinctly and eloquently expressed below by John Hathaway of the Torqueville Gold Fund.
“The global bid for physical gold is potentially immense, we believe it will be generated not by ephemeral and flaky speculative interests seeking instant gratification, but rather by the considered action of capital interests with a long-term perspective driven primarily by the desire to convey present day wealth to future generations.”
By John Robson & Andrew Selsby at RH Asset Management Limited, as published in the Onassis Newsletter, a fortnightly newsletter that gives insight into the investment markets.
For more from RHAM, visit https://www.rhasset.co.uk/