Gold offers double-edged shine
It was Goldman Sachs who famously predicted oil prices to reach $200 a barrel last year, but there are a school of bullish investors who forecast a substantial rally in gold.
Take Gold and Energy Advisor, which predicts gold will soon reach $2,500 an ounce (from today’s $895) then to $5,000. The Florida-based firm argues that gold is the only asset class that’s not only private (as opposed to state-owned), but also liquid, portable, fungible, divisible, and valuable enough that a small amount can store a massive amount of wealth.
It also argues that of $11.5 trillion stored in offshore accounts and other assets, if one percent were transferred into gold, that would be almost four times the entire annual investment demand for gold.
Perhaps not as bullish, but Investec Asset Management also reckons that gold could perform well in either an inflationary or deflationary environment.
Investec also argues the potential areas of concern for gold investors: an increasing supply of recycled gold and the potential return of the “Goldilocks” scenario, where the economy sustains moderate growth and inflation in a “not too hot, not too cold” environment.
“This Goldilocks economy would completely remove the safe-haven investment case for gold as a form of insurance against inflation or as an alternative currency. Real yields could once again be obtained in cash and bonds, and equities could begin discounting economic growth,” it says.