'Gold Is the Best Asset Class To Be In'

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The trouble
with chasing performance is that you often join the party too late.
Yet gold continues to defy the odds and if the great and the good
of the investment world are to be believed, the gold price has further
to go.

Last week,
the analyst rated the most accurate forecaster of the gold price
said the precious metal would keep rising.

Jochen Hitzfeld,
an analyst at UniCredit, the Italian bank, has been rated by Bloomberg,
the news agency, as the most accurate gold forecaster over the past
three quarters. He reckons the gold price is heading for $1,600
an ounce.

His forecast
is the latest in a long line of optimistic predictions. Other gold
bulls include George Soros, famous for making £1bn by betting
against the Bank of England, and John Paulson, the hedge fund manager
who made $20bn by calling the credit crisis correctly.

These expectations
that the price of gold will continue to rise come despite the metal
already enjoying a decade-long bull market, rising from $253 in
1999 to its current level of about $1,260, a whisker below its all-time
high of $1,265 reached in June.

"You can’t
mine gold," say nervous investors who fear that the massive
printing of money by central banks under the guise of quantitative
easing can only lead to runaway inflation. Sceptics of gold as an
investment point to the costs of owning it and the fact that it
produces no income.

Finding an
analyst who is bearish on gold is a tough task; most appear to believe
that gold is a worthy asset, not least because of the continued
economic uncertainty. But four years ago The Sunday Telegraph found
one. Nick Goodwin, a much quoted South African mining analyst, warned
people against jumping on the bandwagon when the price stood at
$600 an ounce.

He said: "I
have been following gold for 30 years and gold is a bitch. Why weren’t
people buying gold when it was $250 but want to buy it at $600?
Gold has had a hell of run and it needs to take a breather."
Mr Goodwin was proved mightily wrong and today the rationale for
investing on gold stands firm.

Mr Hitzfeld
said further increases in the price were "preprogrammed".
He said factors exerting upward pressure were renewed fears among
investors sparked by recent loosening of monetary policy by the
US Federal Reserve and reforms in the Chinese market that gave investors
there greater access to the metal.

"The Chinese
government has encouraged consumers to invest in gold, and with
great success. Chinese demand will now increasingly be felt on the
global markets," Mr Hitzfeld said.

Although China
is now the world’s largest gold producer, this production would
be insufficient to meet domestic demand, so China would increasingly
import gold, draining supply from the rest of the world and putting
upward pressure on the price.

The Chinese
government’s gold reserves have also risen sharply and there is
scope for further increases, as they account for just 1.7pc of foreign
exchange reserves, Mr Hitzfeld said. "We are therefore raising
our target price for 2011 from $1,250 to $1,400 per troy ounce.
For 2012, we now expect $1,600 an ounce."

the rest of the article

14, 2010

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