Managers of two top-performing gold funds expect gold to soar further.
Gold's much-heralded climb above $1,000 an ounce was pretty short-lived. Gold's long-term ascent won't be.
With gold now trading closer to $900, this is a great time to load up on more exposure to bullion, which is only taking a breather before heading to $1,500 an ounce and higher.
That's the view of two gold gurus who have been correctly calling bullish advances in the yellow metal for years, most recently predicting the move to $1,000 an ounce. That was in November, when it seemed like an audacious forecast.
With their forecast proved correct -- if briefly -- they're not backing off. "There is lot more upside for gold," says Thomas Winmill, who manages the Midas Fund (MIDSX), one of the top-performing precious metals funds, with a three-year average annual return of 41.6%. Winmill thinks gold could see $1,500 in 12 to 18 months.
Here's a look at why they think gold will see $1,500 within a year or so.
Reason No. 1: The dollar's value is declining. "Gold is attractive as a safe haven when the dollar is declining," says Holmes. But why will the greenback continue to weaken? Above all, the Federal Reserve has been slashing interest rates dramatically, and it may reduce them even more.
Reason No. 2: More inflation on the way. To see where inflation is headed, just take a peek upstream in the production process, says Winmill.
Reason No. 3: Investors will seek greater safety. Inflation is already so high that investors are losing money in traditional "safe" investments like U.S. government bonds.
Reason No. 4: Oil is getting pricier. Holmes points out that that over the past five years, gold and oil prices have moved in sync 90% of the time. The reason: When oil-producing countries take in more money because oil prices go up, they diversify by investing in gold.
Reason No. 5: Gold should follow other commodities. Since so many other metals, including copper and oil, have smashed their inflation-adjusted price records, why shouldn't gold follow, asks Holmes.
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