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.
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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."
October 14, 2010
