Gold may have dropped to a five-year low last month, but data from a Bank of America Merrill Lynch fund manager survey point to better times ahead for the precious metal, writes Ben Moshinksy of Business Insider.
The BofA survey
shows that investor cash holdings stand at 5.2 percent, near the 5.5 percent record that prevailed after the 2008 financial crisis. And a small majority of investors see gold as undervalued.
"The last time the gold market had signal like this, it was 2009, and the yellow metal more than doubled in price within two years," Moshinsky writes.
Gold traded at $1,115.60 Tuesday, after dropping to its five-year nadir of $1,077.40 July 24.
Forbes contributor Henry To believes in the precious metal too. "With gold’s recent decline to below $1,100 an ounce, I believe today is one of the best times to own gold," he writes on Forbes.com.
Gold represents "an attractive long-term investment."
The precious metal has slumped amid signs of U.S. economic strength, expectations that the Federal Reserve will raise interest rates as soon as next month and the dollar's recent gains.
But To sees several reasons why gold should rebound.
- Gold production will fall over the next few years. Already, output dropped 4 percent in the second quarter from a year earlier, according to the World Gold Council.
- Rising inflation. Though U.S. consumer prices climbed just 0.1 percent in the 12 months through June, "the tightening job market, increased lending, and higher minimum wages all point to higher inflation in 2016," To writes.
Albert Edwards, head strategist at Societe Generale, also is bullish on gold, saying its current weakness creates the best buying opportunity since the 1970s, when the metal surged from $100 to more than $920.
“Western central banks have set us up for an even bigger version of the 2008 great financial crisis/recession,” he writes in a report
obtained by Newsmax Finance.
“This time, rock-bottom interest rates and large fiscal deficits will mean only one thing: QE [quantitative easing] will be stepped up to such a pace that you will hear the roar of the printing presses from Mars. Gold is a must-have holding in that world.”
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