despite a fall in prices, the bull run in gold experienced over the past three years is not yet over
The bull run for gold is not yet over despite a fall back in prices, according to Andrew Whelan, investment director for the Liberty Ermitage Gold & Resources fund.
Gold has been in a bull market phase for the past three years and anyone who had bought into it back in 1999 would have fared comparatively well as the price of gold has risen by around 25% over that period.
Having come out of three decades of a gold bear marketwhich saw the metal stalled at around $300 per troy ounce, it rose to a level of $390 ahead of the outbreak of the war in Iraq earlier this year. It has since fallen back to rest at around $360.
Whelan,believes this is still in the early stages of a gold bull run which could see gold reaching a $400 in the next 12 months. 'All new bull markets climb 'walls of worry,'' he said. 'The backing and filling price action of recent months is just what you need to build the firm foundations for a long and sustainable move upwards.'
He added investors should not be looking at gold on the basis of attempting to make a quick profit. 'You shouldn't buy gold in the expectation that it is going to double in value in a short space of time,' said Rob Weinberg, managing director of institutional investment at the World Gold Council.
Hathaway said investing in gold shares has an appeal to those seeking the considerable leverage to gold changes that they represent.
'They are a long-term call on the gold price,' he added.
However, as opposed to gold itself, investing in shares in gold producers comes with some provisos.
'There are very different risks associated with gold shares,' said Weinberg. 'There is company risk, management risk, equity-related risk, all of which should, if the management is doing its job, be under control, but investors should at the very least be aware of the differences.'
However, a further answer could be available to investors within the foreseeable future. Earlier in May the WGC filed with the SEC in the US for permission to launch the world's first gold ETF.
If the Gold Equity Share receives SEC approval it will allow investors to invest in physical gold through brokerage firms and other mainstream channels. Each Gold Equity Share will be worth 10% of a troy ounce of gold.
At present prices, each share would trade at a price of around $35. Each share will be backed by an equivalent 10% of an ounce of gold deposited with HSBC in London. This will be allocated and thus means that it cannot be lent to bullion dealers or used in the gold derivatives trade.
Hathaway is an enthusiastic advocate for the gold ETF. He suggested it will begin a process of diminishing the influence of the central banks on the gold price. In fact, Hathaway suggests the gold ETF will 'revolutionize the gold market.' It will integrate physical gold with other financial markets and 'end its isolation based on the archaic and creaky conventions' under which it has previously traded.
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