19th July 2011
The twin crises have prompted a flight to safety hence the gold price. That is today's news but Standard Chartered now says the price could reach $5,000 by 2020 reported here in American trade magazine Financial Advisor magazine.
The magazine quotes Standard Chartered Hong Kong-based head of metals and mining Yan Chen saying: "We are looking for the gold price to reach about $2,000 by 2014. There's a chance that the gold price can be as high as $5,000 by 2020."
He believes that long term the market will be boosted by the huge increase in incomes in India and China where gold is a very popular vehicle for savings.
Here Australian newsite ABC quotes another analyst who suggests that as long as countries continue to print money, popularly known as quantitative easing, the price of gold seems almost assured to rise long term.
Matthew Kaleel from investment firm H3 Global Advisors said:"Gold hasn't done as well in the currencies that are stronger – so Swiss francs, Australian dollars. Gold has done best in euros, in British pounds and American dollars," he said.
"If you assume that governments print money to the extent of 5 to 10 per cent a year, you could make a case that gold could go up by that amount every year for the next five to ten years."
But not everyone is a bull as Telegraph head of personal finance Ian Cowie shows here with a very useful spread of views.
He quotes Patrick Connolly of independent financial advisers AWD Chase de Vere who claims there are disturbing lessons from history for investors. He said: "Between July 20, 1976, and January 21, 1980, the price of gold rose by a staggering 688pc, an annualised return of about 80pc, this rise being due to strong oil prices, high levels of inflation and geopolitical issues. This compares with a return of about 17pc per annum for the current bull run.
"However, from its peak in 1980 the price of gold fell by 65pc in less than 2½ years and it took more than 28 years for the 1980 peak to be reached again and investors to get their money back, not even taking into account the effects of inflation. So much for gold being a reliable hedge against inflation."
"It is possible that we are now in a ‘gold bubble' and those investing face the risk of losing far more on the downside than they could potentially gain on the upside.
Cowie has no trouble finding supporters though. Adrian Ash of Bullion Vault.com points out that gold has been a reliable inflation hedge ever since US investment bank Bear Stearns' proprietary hedge funds got into trouble four years ago and the world has struggled to truly escape the financial crisis.
On the Telegraph Commenter Angled says: "I don't think this is a "bubble" that is going to burst anytime soon, thanks to all the so called stimulus packages and quantative easing along with record levels of national and personal debt.