 CAPE TOWN (miningweekly.com) - A rise in the gold price to $2 300/oz "would not be surprising", US Global Investors portfolio manager Ralph Aldis said on Wednesday.
Aldis also told the Mining Indaba in Cape Town that, if history was an indicator, there might also be only five more months of recession.
"If you plotted gold, the gold price went to its biggest extreme in 15 years inverse to the dollar and prompted people to get some gold in their portfolio," he added.
There were strong signals that gold should be added to investment portfolios.
While in the short term the gold price could pull back, gold was still a fairly safe investment in the longer term.
It would not surprise him, Aldis said, if the gold price were to rise to $2 300/oz.
He based his only-five-months-more recession projection on the fact that, since 1945, recessions had averaged only ten months and the longest being 18 months.
He contended that that the current recession had already been under way for 13 months, and therefore there might only be five more months to go, if history was anything to go by.
Even though retrenchments might continue as various companies downsized, the overall economy and the market might turn up in five months as banks put money back to work and governments embarked on infrastructure projects.
Aldis said, too, that it was not commodity demand that had fallen but rather the inability of shippers to secure credit from stricken banks to finance the shipping of commodities.
"The dramatic correction has delayed but not destroyed the 20-year commodity cycle," Aldis said.
The world had many economic stimuli coming through in addition to seasonal cycles, with gold demand building up steadily from August.
US Global followed government policies, as it was government policies that drove markets, as had ben evidenced by the US Senate voting in favour of permission being granted for stock to be shorted in a market downturn, and not solely during market upturn..
Making it easy to short was a policy change that had contributed to the current economic impasse.
He described the US government's decision to allow Lehman Brothers to fail as a "pretty dramatic mistake", as that policy decision had resulted in the commercial paper market freezing, banks ceasing to lend to one another and the collapse of the market.
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