Gold is making regular headlines these days as global economic uncertainty remains high and the yellow metal recently reached record prices of just over $1,900 per ounce. Since a sharp correct where gold gave back over $200, the price has recovered and gold is currently trading around $1,885 per ounce.
Goldman Sachs said it expects gold prices to continue to climb in 2011. The U.S. based investment bank cited the current low level of U.S. real interest rates, European debt issues, balancing inflation with growth in China, and mixed data from several major economies as drivers for gold’s continued appreciation. “We recommend near-dated consumer hedges in gold,” stated analysts at Goldman Sachs and they expect further price increases later this year and into 2012.
According to Citigroup, a resurgence in investment demand has fueled gold’s rally over the past decade. Investment demand has grown from 4% of total demand for gold in 2000 to over 39% in 2010. “We caution that this very aspect that provided support for gold over this time may result in its downfall going forward,” noted Citigroup. “Even a slowdown, let alone a decline, in net investment flows can have a materially negative impact on the gold price from current levels.” So whether you are a gold bug bull or a gold bubble believer, one thing is for certain, there is no denying gold’s captivating run.
With all the excitement around the price of gold let’s not forget gold equities. Tye Burt, President & CEO of Kinross Gold (TSX:K) may have crystalized the argument for gold equities best when he stated in a recent interview with CNBC, “Gold price is up 25% year-over-year and our earnings effectively doubled. There is a leverage in the gold producers which will play out in their equity prices.”