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22-Sep (MotleyFool Canada) — The price of gold has risen about 27% since the
start of the year—recently closing at $1,318 per ounce—and while it has
pulled back slightly, analysts at Royal Bank view any pullback as a buying
opportunity. According to Royal Bank, gold has entered into a new bull market
and predict gold will rise to $1,500 per [ounce] in 2017, 14% above current
levels.
This is in line with the vast majority of gold analysts. Bank of America
and Credit Suisse see gold at $1,500 in 2017, and firms like Natixis and UBS
see gold rising to $1,400 per ounce by the end of this year. The bullish
consensus on gold can be explained by a few key factors, and, combined, these
factors will support the next run-up in gold prices.
While there has recently been news of prominent investors adding exposure
to gold (George Soros and Stan Druckenmiller come to mind) there has been an
even more significant buyer of gold over the past several years—central
banks. Central banks are a key source of gold demand, and since 2010 the
central bank portion of total gold demand has risen from under 2% to over 14%
at the end of 2014.
…This source of demand will coincide with a diminishing supply outlook.
Chuck Jeannes, Goldcorp.’s CEO, sees gold as hitting peak supply in the next
year or two, which means that gold production will decline annually going
forward. Goldcorp sees global mined production falling 13% by 2022. The
demand for gold, however, is only set to strengthen.
…With average global bonds having yields of only 0.67%, gold will only
seem more attractive compared to bonds.
PG View: Heightened demand and tightening supply . . .
the perfect recipe for higher prices . . .
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