Tags: gold | demand | physical | market

Gold Bugs: Gold Price Will Soar

Friday, 07 Feb 2014 07:06 AM

By Michael Kling

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Rising demand for physical gold will soon translate into rising prices, some experts predict.

"Physical gold is disappearing off the market at a terrible rate. As soon as that really starts to hit I think gold goes through the roof," Jim Walker, CEO of Asianomics, tells CNBC. "That's one of our biggest longs for the year."

Barry Dawes, head of resources at Paradigm Securities, agrees that gold is heading to another bull market.

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These 38 Investments Have a 96% Win Rate

Spot gold prices, hovering around $1,256 an ounce, seem to be going nowhere, at least for now. But that's because prices have been suppressed by investors selling gold exchange-traded funds, Dawes tells CNBC.

"I can't see that lasting very much longer at all and that real supply-demand numbers for gold will push to a higher gold price," he notes.

"There are some fundamental changes that have taken place and one thing that I really note is the performance of gold stocks. They have started to look better, but more importantly they have broken a two-year downtrend against all stocks."

Spot gold is up more than 4 percent this year, clearly besting faltering stock markets. It's also outperforming other precious metals like silver, which is up 2.3 percent, and platinum, up 0.75 percent, CNBC reports.

Demand for gold coins has also jumped around the world. For instance, Australia's Perth Mint reports that sales of gold coins and minted bars increased 10 percent in January.

However, investment bank analysts generally predict gold will drop this year. Their average prediction calls for the precious metal to fall 14.5 percent, from $1,413 to $1,209 an ounce, this year, MarketWatch reports.

Forecasts range from a 19.2 percent drop to $1,141 from Deutsche Bank to an 8.6 percent drop to $1,292 from HSBC. A continuing economic recovery, the tapering of the Federal Reserve's bond purchases and lack of inflation will push gold down, the analysts predict.

Despite recent demand, Bank of America Merrill Lynch strategist Michael Widmer believes lack of buyer interest is another factor, according to MarketWatch.

"If investors stopped selling gold, prices could stabilize around $1,200 per ounce," he states in a report. "Yet, this is not our base case and a more likely scenario is for investors to continue reducing their exposure. Our model suggests that this could take prices down to $1,000 per ounce."

Editor’s Note: These 38 Investments Have a 96% Win Rate

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