Gold's upward trend to continue: APMA

“I am super bullish on gold’s long-term prospects and I do believe that now is the best time to invest in gold in order to capture the unprecedented appreciation in the price of gold that lies ahead,” APMA managing director Jeffrey Nichols said.

Speaking at the “Gold Market Situation and Outlook: Now Is the Time” seminar arranged by the Thailand Futures Exchange, he predicted the current gold price of about US$1,277 would increase by $100 by the end of the year. And if there is a significant problem within Wall Street or the US economy takes a dive, the price will likely increase more than expected.

Geopolitical risks could also drive up the price through the consequent growth of demand for a safe haven.

“Further crisis [in Europe and the Middle East] will briefly send the gold price higher and improve the technical picture, which means that the price could grow by $100 and possibly even more by the end of the year,” he said. “By the end of next year it could be up by another 15-20 per cent, and I think that is conservative, but it depends on how the environment will evolve.”

Nichols said what mattered most in terms of the price, for now at least, was the direction taken by Wall Street, such as the perceived attractiveness of equities versus gold.

He said the main factors weighing on the gold price over the past few years had been the strong competition from global stock and bond markets as well as the pressing need by hedge funds and other institutional investors to match the recently attractive performance of ordinary stocks and bonds.

“For geopolitical events to have a long-lasting influence on gold prices, they must have significant long-term economic consequences, such as a major disruption in the world’s oil supply,” he said.

“For the short-term prospects for the element, much is dependent on large-scale institutional speculators and their computer simulation models.”

Nichols said that sooner or later stock prices would drop and the gold price would rise based on the recent flow of funds from gold exchange traded funds (ETFs) into ordinary stocks and bonds.

Supporting that forecast was the fact that short-selling in the futures market had been lower in the past three years, as seen by a drop in the net sales of gold ETFs due to “weak hand” investors and the liquidation of assets.

“Once sentiment on Wall Street turns negative, investors will begin discarding equities and some of the freed-up funds will find their way into gold,” he said. “One omen that better times are ahead for the yellow metal will be falling equities coinciding with a rise in gold prices.” 

Nichols predicted that the all-time record gold price could be doubled in the next 10 years. He based that on the expected rise of global demand for the precious metal, especially from China and India – which were experiencing increased household incomes and a burgeoning middle class. He said there was also growing demand from central banks worldwide in order to increase the stability of their currencies.

China and India are the two biggest gold consumers in the world, and the increase in demand through the expected lower restrictions on the import of gold in those two countries within the next decade could drive the global price up to around $3,800 per ounce by 2024.

The current all-time record is $1,920 per ounce, set in 2011.