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We expect gold prices to gain 11.7% this year thanks to rising demand and slipping global supply. That means gold will be a great long-term asset to have in your portfolio this year.
Despite some weakness over the last month, the gold price is up 8.8% to $1,253 so far in 2017. And Money Morning Resource Specialist Peter Krauth expects it to rise another 11.7% to $1,400 per ounce by the end of this December.
But while physical gold could give you that 11.7% return in just over seven months, we're looking at another gold investment that could see a more explosive gain. This gold mining stock could potentially soar 63.6% over the next 12 months.
Before we get into that, here's how gold prices have trended this year and what their rebound could do for our gold stock recommendation today…
Gold Is Still a Good Long-Term Investment Despite Recent Declines
Investors might be worried about gold because prices dropped from late April to early May. The metal fell 6% from $1,294 on April 18 to $1,216 on May 9.
One factor was the election of French President Emmanuel Macron on May 7 over right-wing candidate Marine Le Pen. After the first round of the election on April 23, Macron's huge lead over Le Pen reassured investors there would be no market volatility. They speculated that Le Pen winning would have resulted in France pulling out of the European Union (EU). A Frexit following last year's Brexit would have further destabilized the already fractured EU, possibly leading to a big stock market sell-off.
But Macron's victory meant no market volatility. Since gold prices typically rise when the market dips as investors use gold as a safe-haven hedge, the metal instead fell to a two-month low of $1,216 on May 9.
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Still, gold's brief decline was only temporary. After all, the metal has rebounded 3% to $1,253 since the May 9 bottom. Krauth believes this rebound will continue to $1,400 per ounce, and there's one important reason why he's bullish…
It's simple: falling supply and rising demand.
Krauth's forecast is driven by gold fundamentals. Demand is climbing around the world at the same time as supply is falling. That's a perfect recipe for a rising gold price this year.
Recent data from the World Gold Council showed that global demand in the first quarter was 1,034.5 tons. Gold supply during the same time frame was 1,032 tons. As you can see, supply is coming up short of demand.
Demand for gold is steady worldwide. Investors in Europe, especially in the UK and Germany, purchased eight times more gold exchange-traded funds (ETFs) than investors in the United States. Moreover, Q1 2017 was the third consecutive quarter that gold ETF demand from Europe was greater than U.S. demand. This likely indicates the unease caused by the Brexit and the prospect of Frexit.
Gold demand has also remained strong in Asian countries. Recently, a UBS research report on gold indicated an expectation of gold prices trading in a tight band for a while as concerns over the French election subside. UBS also said that the price of gold falling near $1,200 might spur discount buying.
All of this shows how gold is set to continue its rebound throughout 2017. But instead of investing in physical gold, we recommend buying this gold mining stock, which could rally 63.6% by May 2018…