If you think gold prices have peaked, think again. Gold may have fallen from its June 18 record high of $1258.30 an ounce, but the yellow metal is in for the long haul.
In fact, Credit Suisse Group AG (NYSE ADR: CS) has increased its long-range forecast for gold, arguing in a new report that prices should remain near current levels for at least the next four years.
CS analysts' 2014 target is now $1,300 and ounce, compared to their previous forecast of $1,120. That may not seem like a very brave forecast since gold is already trading at nearly $1,200 an ounce. But it has profound implications for gold miners, because mining stocks are priced based on expectations of future earnings. Removing the expectation that gold futures prices could slide way back removes an impediment to shares going higher.
The rationale for the change: Credit Suisse believes there is an 80% chance of a renewed quantitative easing – or money printing – due either to a full-blown sovereign debt crisis or a new recession. This enthusiastic and inflationary activity would rev up the safe haven buying that has pushed up gold prices over the past few years. The feeling is that companies and government officials may cheat and lie, but gold is as steady as a rock as an irrefutable, trusted source of value.