Gold is headed much higher soon, despite its 1.3 percent decline Wednesday, says Jeff Kilburg, CEO of Killir Kapital Management.
The Federal Reserve’s quantitative easing to date has bloated the central bank’s balance sheet to $2.8 trillion, pulling up the price of gold with it, he tells Yahoo.
And more is coming, he says. "The theoretical value of gold when you see that the monetary base grow by another 18.4 percent is $2,000.”
Editor's Note: Get David Skarica's Gold Stock Adviser — Click Here Now!
That would mean a 17 percent increase from the $1,706 spot price late Wednesday.
Eventually, all the Fed’s easing will lift inflation, Kilburg says. “Once we see inflation, specifically in wages, you will see gold continue to run.”
Consumer prices increased 2.2 percent in the year through October.
Buying from central banks and institutional investors also will support the precious metal, Kilburg says.
He recommends investing in gold through the SPDR Gold Shares (GLD) exchange-traded fund (ETF). If you’re worried about volatility in that ETF, you can sell call options, he notes.
December gold futures fell $25.80 Wednesday to close at $1,716.50 an ounce
That drop “is counterintuitive with everything else that is going on in the economy,” Ross Norman, CEO of Sharps Pixley, a London-based gold brokerage, wrote in a note.
The debt woes of Europe and the United States could normally be counted on to boost gold. But it has recently traded as part of the risk-on/risk-off pattern, creating volatility.
Editor's Note: Get David Skarica's Gold Stock Adviser — Click Here Now!
© 2013 Moneynews. All rights reserved.