The gold price continues its record-breaking climb, and shows few signs of stopping.
Industry analysts and bankers met at the London Bullion Market Association conference in Berlin this week – the biggest gold industry gathering – and predicted gold would hit $1,450 an ounce next year, a 12.5% climb from its current price of around $1,300. The LBMA's predictions have a strong track record, and in recent years often fall just shy of actual prices.
"The key thing, as far as I see it in the gold market, is gold is a store of value," said John Reade, precious metals strategist at Paulson & Co (Nasdaq: PLCC), in a presentation to delegates at the conference. "It is not just something that goes up, it is something that holds onto its value when everything else goes down."
Gold is up almost 20% this year, and hit a record $1,308.20 this week.
"The $1,300 was the line in the sand between bulls and bears," said Adam Klopfenstein, a senior market strategist with Lind-Waldock in Chicago.
By now practically everyone has hopped on the gold train – and more evidence for price climbs hits the news daily.
With lack of confidence in government's monetary policies, and a pessimistic tone from the U.S. Federal Reserve last week, gold continues to offer safety few other investments can.
"The most recent actions of several central banks have added fuel to fears regarding a depreciation race among global currencies," said analysts at Commerzbank in a note to clients. "These fears should boost the gold price in the long run."
Now governments have stopped unloading their gold reserves. After decades of central banks selling gold bars, they could become net buyers for the first time since 1988. The behavior shift – called a "game changer" by some experts – has further encouraged individual investors' purchases of bullion, while also reducing the supply of gold on the market.
And this new buying trend could even accelerate.
The proportion of bullion as a percentage of official reserves in the BRIC economies – Brazil, Russia, India and China – averages 5%, while it's more than 50% in the United States and Europe. Developing countries are likely to increase those reserves in coming months.
Also, Chinese investors will have an easier time satisfying their appetite for gold.
A decision by the People's Bank of China in August to ease restrictions for importing gold means there will likely be more gold bought on the global market.
"Going forward, with these measures, access will be much easier for investors who want it," said the World Gold Council's Far East managing director Albert Cheng. "In the next few years, you will see the real gold demand for China."
Money Morning analysts for months have been predicting the gold price surge that investors shouldn't miss.
Contributing Editor Peter Krauth predicted that gold's long-term price will hit $5,000 an ounce in a few years, and reach $1,500 next year.
That brings us to the latest Money Morning "Question of the Week": Could gold prices realistically hit as high as $5,000? If not, how high are prices likely to go – where do you see this trend heading? How have you profited from the record-breaking price climbs – what's your gold investment of choice? Do you see any reason for a slow down?
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News and Related Story Links:
- Money Morning:
Gold Will Hit $5,000 an Ounce Long Term … But the Near-Term Profit Prospects Are Even Bigger
- Money Morning:
Special Report: How to Buy Gold
Gold ends at record high, taps $1,300
Gold industry eyes another boom year for bullion
China set to take centre stage in gold market
- Financial Times:
Experts see gold price rising to $1,450
- Money Morning News Archive:
Question of the Week Feature