Gold has continued to be dependable and solid throughout the euro zone debt crisis, bank bailouts and changes of government bought about by financial needs rather than political.
According to Valbury Capital, the price of gold will continue to be driven by fears over sovereign debt default, the solvency of the banking system and the threat of global recession, which means gold will remain an attractive option.
With the possibility of a US and global recession getting closer and the impetus in early 2012 for people to search for safe havens, gold just might be the one that suits the most.
Over the last five years prices have risen from US $650 /troy Oz. to around US $1650, a steady gain of over 250%, without ever seemingly to over stretch or show signs of running out of support. And investors who have the patience and fortitude to hold gold since it hit a US $257 low in January 2001 have been richly rewarded with a five-fold increase in their investment.
During the last major gold bull market, which ran from early 1970 to early 1980, gold prices rose from US $35 an ounce to US $850 – a 24 fold multiple – and while it seems unlikely to reach this in the near future, gold will continue to remain an attractive option.
Halfway through the 2011 euro zone crisis a "mini boom" hit the gold market as everyone went to it as the safe haven that was needed at the time. Prices reached up to US $1900 before a "bust".
What is interesting about the boom-bust that happened in 2011 is that even after the bust and come down that followed, the exit route for the market still allowed earlier gains to be kept; an almost linear gain continued as a robust market demonstrated to the world that you don’t need "booms" and "busts" to be popular, a quietly well-built rally over five years can be just what the doctor ordered.
Jonathan Bristow, a broker at Valbury Capital, said: "While the persistence of very low or even negative real interest rates continues to erode the wealth of those holding cash on deposit, gold is going to remain an attractive investment option, especially since gold has risen for 10 years in a row and has returned on average 18% with no down years.
"Going forward although there may, and indeed will, be points where short-term gains are lost, the overall structure and this almost attritional way of working through resistance to make a gain could be the safe haven that people want go to when the hectic world of bonds and indices get too much in 2012."
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