JOHANNESBURG (miningweekly.com) – The price of gold will trend higher, ultimately reaching a price of $2 000/oz to $3 000/oz over years, says American Precious Metals Advisors MD Jeffrey Nichols.
Nichols, who addressed the India International Gold Convention in Goa, says that gold is at a key turning point in its history, which is "very propitious" for the metal's price.
"Today, real interest rates are again negative, and, if history is a guide, we can expect the price of gold to trend higher over the next year", ultimately reaching the long-term cyclical peaks of from $2 000/oz to $3 000/oz, over a period of years.
But he predicts a highly volatile gold-price climb, fraught with sharp reversals, partly because gold exchange-traded-funds are a two-edged sword that can increase volatility both up and down, and he reminds investors that, first and foremost, gold is a monetary asset.
The official central bank sector, he says, is poised to become a net purchaser of gold and the early signs of stronger demand ahead of India's marriage and festival season could be a harbinger of gold's next move to a level above the $1000/oz mark.
He says that that small US business is dying and household incomes are in "agonisingly slow" recovery mode.
Regional banks are still failing and commercial property insolvencies can be expected.
Although some government stimulus programmes have provided short-term help, all are adding to the US's budget deficit and could force the US Federal Reserve to keep real interest rates low for years, which is bad news for the dollar, and music to the ears of the gold bulls.