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MONTREAL – Gold is expected by many to continue to sparkle as an investment opportunity over the next two years despite a 12-year bull run that briefly took the precious metal as high as US$1,900 an ounce before pulling back.
Investment strategist Gavin Graham says gold should rise from its current price of US$1,689 an ounce to approach the 2011 high price later this year before perhaps hitting US$2,000 in 2014.
“I know a number of people have got US$2,000 an ounce pencilled in at some stage over the next 18 months to two years and that’s not an unreasonable forecast,” the president of Graham Investment Strategy Ltd. said.
Gold saw its smallest price increase since 2008 last year and, adjusting for inflation, it remains below the real all-time peak of US$850 per ounce set in 1980. That’s equivalent to a nominal value of about US$2,500.
Once gold breaks through US$2,000, Graham believes it could attract skeptical buyers. “There’s still more legs in it even though it’s gone up a lot.” Serge Pepin, vice-president Investment Strategy of BMO Global Asset Management, also sees gold rising despite fears that India, the world’s largest buyer of the metal, could slap a bigger tax on gold imports.
Increased demand for jewelry due to improving economic conditions and the prospect of higher interest rates, should propel demand for gold as a hedge against inflation, he said.
“We still see some upside but if you look at where it was 10 years ago to where it is today, we think that the pace of growth in gold will be relatively subdued — positive but subdued,” Pepin said.
He also points to gold hitting $2,000 over the next 18 to 24 months. Not everyone agrees.
Goldman Sachs recently lowered its price forecasts for gold in 2013. The U.S. investment bank cut its six- and 12-month forecasts by about seven per cent to US$1,800 per oz. It also introduced a 2014 gold price forecast of US$1,750.
Skeptics aside, there are those who gold as ain investment for uncertainty times.
Some observers believe the looming debt ceiling crisis in Washington could support higher bullion prices. Since bullion and gold futures are sold in U.S. dollars, a devaluation of the American dollar tends to push up the gold price.
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