, NC (PressExposure) March 21, 2009 -- Bud Blair of Gold Tree Online points out that with gold prices at an all-time high, gold buying is big business--and investors need to pay attention. Shrewd investors should look to gold now to increase their position in a down global economy.
Analysts are expecting the gold industry output to continue its decline since there haven't been any significant gold mine discoveries in recent years. Estimates are out that gold will trade between $900 to $1,200 per ounce range throughout the next several years, both because of the industry's low output and flight-to-quality demand. What's more, most other asset classes have taken mighty blows from the global recession, and gold is the classic hedge fund asset in troubled financial times.
In the physical sector, all falls in gold jewelry buying obviously gets picked up by higher investment demand in the low-cost gold-backed exchange-traded funds (ETFs). Gold ETFs get listed on stock exchanges. Everyday investors can trade in gold bullion without taking physical delivery. ETF sponsors purchase a concurrent amount of physical gold which gets kept in bank vaults. ETFs have seen a surge in investment money as the value of the underlying commodity has risen.
CEO Richard O'Brien, of Newmont Mining Corp, the world's second largest gold producer, says, "I will be surprised to see gold on average below $900 this year. Inflation is something the world has to deal with. Jewelry demand will go up and down, but overall, the burgeoning population in China, the Middle East, and India will, over time, continue to drive the demand for jewelry, and I think that demand will come back..I think that gold bullion stocks will outperform gold bullion the metal this year."
Part of the concern about gold prices lies in the fact that central banks around the world have approximately 25,000 tons of gold held in reserves, as they have traditionally hoarded gold to maintain the value of their currency. If they chose to sell just a small fraction of that on the open market, gold prices would crash, and investors holding gold would be crushed. Something like this happened 1998, but since then central banks have agreed upon sales quotas so that gold-dumping and the subsequent price crashing would be avoided.
All said, serious investors should look to gold stocks and instruments now, more than ever.