Gold to go only one way from here... Up!

Has the moment of truth arrived for gold prices? Are we staring at structurally high gold prices from now on till forever in the future? If the recent actions of the world's top producer of gold is any indication, you cannot help but answer in the positive to both the above questions. As per reports, Barrick Gold, the world's largest producer of gold is moving fast to completely close its hedging operations as it does not believe that gold prices could fall a great deal from here. Perhaps, the decision has a lot to do with a statement from the company's president recently that global output has been falling by roughly 1 m ounces a year (approx 33 tonnes) since the start of the decade and hence, there is a strong case to be made that we are already at 'peak' gold. And with central banks around the world also turning into net buyers of gold in recent times, supply crunch is likely to worsen a great deal more, taking gold prices even higher.





Barrick was not the only one betting on much higher floor for gold prices in the future. Marc Faber, one of the world's pre-eminent investors has also jumped on to the bandwagon. "We will not see less than the US$ 1,000 level again", he is believed to have said at a conference today in London. "Central banks are all the same. They are printers. Gold is maybe cheaper today than in 2001, given the interest rates. You have to own physical gold", the maverick investor further added.



We are of the opinion that while the case for gold looks very strong indeed, this does not mean that there is absolutely no likelihood of the yellow metal going below US$ 1,000 per ounce. For that matter, even the dollar can rally enormously from the current levels. However, the odds that both these scenarios will happen in the near to medium term is certainly on the lower side. So, while having gold in your portfolio does make sense, one should refrain from going overboard with it.