Jeff Nichols continues to believe gold will go on to new highs over the next few years as the gold ‘free float' shrinks and demand continues - but the path will not be a smooth one.
Author: Jeffrey NicholsPosted: Tuesday , 10 Jan 2012
NEW YORK -
In contrast to the closing months of 2011, gold has begun the new year on a more positive note. Whatever the metal's short-term prospects - indeed even if gold takes another dive - we believe 2012 will be another stellar year for gold investors.
Gold topped out at an all-time high just over $1,924 an ounce in early September - a whopping gain of some $600 or about 50 percent from last January's low point. But as investors know all too well, gold prices can be quite volatile - with big upswings often followed by big downturns, albeit around a rising long-term trend. Such has been the experience of the past four months with gold shedding roughly 30 percent from its all-time high to its recent late-year low point of $1,522. But, let's not forget, even allowing for this deep price correction, gold still closed the past year with just about the best annual gain of any asset class!
Looking ahead, 2012 could well turn out looking much like the past year for gold - with sizable gains, possibly as much as 50 percent (or more) from the recent lows, but also with occasional big declines that may lead many observers of the gold scene to mistakenly declare an end to the yellow metal's bull market. Just as gold bears have been wrong over and over again in the past decade, so will they continue to be wrong in 2012.
The story of gold in recent years has been a tale of institutional traders and speculators - including hedge funds, commodity funds, and the trading desks at the big banks and financial firms - producing great two-way volatility as they rushed into gold (as we saw last summer) and then, not just unwinding long positions, but shorting the metal in a big way (as we saw this past fall).
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