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Gold forecast to soar over $1000 mark

Julius Baers currency-hedged physical gold fund manager Stephan Mueller says gold prices could easily hit $1,000 an ounce by the end of this year.

After reaching a low point of $253 per ounce in July 1999, the price of gold rose steadily and broke through the $1,000 barrier for the first time in March 2008. It was $918 per ounce as at July 8.

Mueller, who manages the £1bn, fund says continued concerns about the global economy will continue to drive prices upwards. He says: “I think we will easily see another approach above the $1,000 mark. This is very conservative and between $1,000 and $1,200 in the mid-term is possible.”

He says investors should consider buying into a gold through a physical fund rather than through complex structured products or debt securities. He says: “If you want gold as a safe haven, you have to have it off balance sheet, segregated, physically fully backed and it must be currency-hedged.

“People who buy gold without currency hedging have understood nothing about gold. Without the currency hedging, you immediately lose the function of gold that you bought it for which is as a hedge.”

Mueller says a 3 to 5 per cent portfolio holding would act as an effective diversifier for a balanced investor.

He says: “If you have the chance to invest part of your portfolio in gold, perhaps 3 to 5 per cent, you will have a cushion or bumper function and if all the other assets are crashing you have gold on the other side which is most likely to appreciate in that situation.

“Gold does not lose a lot of ground if other assets are picking up so it does not harm you if the rally in stocks launches.”

Norwood Consultants principal Harry Katz says: “I would not argue with that at all. If you are buying physical gold, you have got A bargain time now, so buy now before it goes up.”

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