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Gold to hit $2,000 within a year, bets fund chairman
by Robert St George on Oct 02, 2013 at 07:49
Malcolm Burne, chairman of the Golden Prospect Precious Metals fund, has argued that gold is primed to enter ‘the final stage’ of its bull phase and will outperform all other assets ‘in quite a spectacular way’.
The gold price has plunged by a quarter over the past year, to less than $1,300 an ounce, its lowest level in three years.
Burne attributed this to ‘profit takers’ selling their holdings after a long period of appreciation, as the metal’s price trebled in less than a decade. In particular Burne pointed to the sell-off of gold exchange-traded funds, which lost 22% of their tonnage in the first half of the year.
Set against this, Burne took succour from the attendant appetite of emerging market central banks for buying gold: Russia, Turkey, Korea and Kazakhstan have acquired almost 200 tonnes of gold between them so far this year.
For Burne, this signalled the resurgence of gold as a safe haven asset as uncertainty over the tapering of quantitative easing weighed upon equity and bond markets. He also identified the inflationary pressures stored up by such prolonged money printing as supportive of a prolonged gold rally.
‘Gold will always be an emotional subject with many bankers and investors,’ Burne said. ‘But without any counter-party risk that other financial instruments carry, it still remains the best insurance policy around today. And when serious inflation inevitably kicks in once more, the final stage of gold’s long-term bull market should see gold and silver shares outperforming all other forms of investment and asset classes in quite a spectacular way.’
Burne expects the gold price to broach $1,500 by the end of 2013 – a level ‘at which there was a battle royal fought but lost earlier this year’ – and claimed it was ‘more than likely’ to reach $2,000 over the coming 12 months.
Golden Prospect’s manager, Will Smith, added that he had used gold’s recent weakness to buy more of the metal’s miners through the fund’s debt facilities. ‘The market's movements have given us an opportunity to use the gearing to upgrade the portfolio and to enter some high quality development and exploration projects which previously traded way above our valuation,’ he explained.
Smith’s largest holdings are Silver Wheaton, Regis Resources and First Majestic, which together represent a third of his portfolio. Smith remarked that they had ‘proven management teams’ and operated ‘at the low end of the cost curve’.
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on Dec 10, 2013 at 12:57