By Michael Fuljenz
The long-term outlook for gold remains positive and it may climb to $1,500 an ounce or more in 2015, according to Michael Fuljenz, president of Universal Coin & Bullion of Beaumont, Texas, who has been tracking and writing articles about the precious metals markets for decades.
“Public demand for gold coins was strong during the past year. Despite often negative and sometimes misleading comments on Wall Street about gold, there’s a continuing public demand for gold as a time-proven, long-term investment,” Fuljenz said.
He says there are five fundamentals that should push gold prices higher in 2015.
• Central banks around the world continue to stockpile gold. Gold had a great year outside the U.S. Central bank buying accelerated in the second half of 2014, even as gold prices declined in terms of the U.S. dollar. I expect this trend of rising central bank gold buying to continue in 2015.
• Lower prices prompted mines to close down. The average cost to mine an ounce of gold is $1168, so many mining operations were closed down when gold fell below $1200. Also, gold recycling fell to a seven-year low in 2014.
• Exchange-traded fund (ETF) demand leverages gold’s rise. Throughout most of 2013 and 2014, the Wall Street crowd stayed out of gold, but the Wall Street herd usually invests in what’s hot, selling anything that falls. If gold should turn hot, the Wall Street crowd could again quickly jump on the gold bandwagon. Some hedge funds have slowly turning bullish on gold since this past August.
• Demand for gold in Asia is almost certain to go up. India recently relaxed import restrictions and demand for gold continues in China as a currency hedge. Those two countries account for 30 percent of the world’s population, but more than 50 percent of global demand for gold.
• The U.S. dollar should either fall or flatten out. That will give U.S. investors an advantage in the gold market.
“It’s a mistake to think that gold tracks inflation each year or month or even decade. Gold does not track inflation that closely. Gold is subject to the buying and selling of market traders, like any investment, but over time gold has proven itself to be an inflation hedge, a deflation hedge and a currency hedge,” Fuljenz said.
“The key for most investors is not to guess about gold’s price or currency trends, but to keep accumulating gold and silver-based investments at these bargain prices.”
He points out that since August 1971, when President Richard Nixon signed legislation allowing U.S. citizens to again invest in and hold physical gold assets, the Consumer Price Index of inflation has gone up about 480 percent while the price of gold has increased more than 3,300 percent.
“So, gold has beaten inflation by almost seven-fold since then. If you track it back to 1913, the year the CPI was started -- and the same year the Federal Reserve was born -- the CPI is up 23-fold while gold is up 58-fold. Gold has grown 2½ times the rate of inflation the past century.”
This article was originally printed in Numismatic News.
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