If the experts are right, gold could be poised for another banner year in 2008.
Experts say they expect continued weakness in the dollar and robust investment demand, and that prices for gold could surge to above $1,000 an ounce in the next 12 months, according to a broad cross-section of professionals interviewed by
As with last year, everyone in the group sees a continuation of the historic bull run. But this time there is also a distinct bias toward favoring bullion and the bullion exchange-traded funds, such as
streetTracks Gold Shares
iShares Comex Gold Trust
, over mining stocks.
Typically, gold bulls have favored buying shares of
and other miners rather than the metal itself.
Bullion prices surged in the second half of 2007 as the crisis in the credit markets shook investor confidence and increased the allure of hard assets in general and gold specifically.
In early November, the price of gold flirted with the record high of $875 an ounce that was reached in 1980 at the height of the Iran hostage crisis. But now, unlike 27 years ago, the price of the metal has remained elevated, with this year's average level set to come in around $690 to $700, compared with $612 in 1980 and $607 in 2006.
The usually cautious Jessica Cross, CEO of the London-based consultancy VM Group, says gold prices should get a double boost next year from continued declines in the value of the dollar and the uncertainty of a U.S. presidential election combining to drive up demand.
In the past, Cross has been harshly criticized for her bearish price forecasts, but now she has joined the herd. She says less metal coming out of mines and smaller amounts of scrapped jewelry will also constrain the gold supply.
The best way to play the rally, she believes, is through the gold ETFs.
"It is a proven and successful product, and it has changed the way people think about investing in gold," she says, adding that total holdings from all bullion ETFs globally should climb to 1,000 tons from the current level around 800.
As for the price, she says she would "be disappointed if it didn't break $900."
Newmont CEO Richard O'Brien is comparatively bearish, predicting that gold will fluctuate between $800 and $850 an ounce. He says gold stocks could do better for investors next year than the metal.
"Cash flow and earnings from the stocks could be much more significant than they have been over the past few years," he said in
a recent interview. "Gold the metal has
recently outperformed gold stocks. But when will that reverse itself? This might be the time to revaluate."
At the optimistic end of the spectrum is well-known gold bug James Turk, who has a projection of $1,500 an ounce at the high end of his forecast. He says the next leg of the bull run should mean a rally of 30% next year.
Turk says the mortgage crisis will spread much further than previously expected, and that a new factor in global financial markets should propel gold prices to record levels: counterparty risk.
"That's where people start to question the promises made by financial institutions and wonder whether they are creditworthy," says Turk. As a result, investors will want gold, he says.
Turk recommends purchasing coins or bars rather than ETFs.
Portfolio manager Jean-Marie Eveillard, who runs the $1.2 billion
First Eagle Gold Fund, agrees with the bullion-over-miners call, saying it means not having to worry about the management.
"Gold-mining companies have been in the terrible habit of issuing equity, diluting the value of the stock to current shareholders," says Eveillard.
For that reason, he says the ETFs are less of a hassle than owning physical gold. He's bullish, but he wouldn't venture a gold price target.
Frank Holmes, who runs the $192 million
U.S. Global Investors Gold, sees a 60% chance of the price exceeding $1,000 next year, with inflation worries driving the market.
Unlike last year, when Holmes focused on recommending mining stocks, this year he says more than half of any gold allocation should be in bullion, either coins such as the U.S. Mint's gold eagle coins or one of the ETFs.
David Beahm, vice president of economic research at New Orleans coin-dealer Blanchard, sees a price of up to $1,150 by the end of next December.