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ETF Trends - Five Reasons Why Gold ETFs and Miners Could Shine in 2013

January 21st at 6:15am by Tom Lydon


Gold exchange traded funds have remained relatively flat so far this year, but S&P Capital IQ analysts expect the precious metal to strengthen this year as loose monetary policies debase global currencies and low gold supply support prices.
“S&P Capital IQ Equity Research remains positive on the outlook for gold and gold-related investments for 2013,” Leo Larkin, S&P Capital IQ Equity Analyst, writes in a research note. “We expect gold to rise 15% in 2013 and finish the year at about the $1,930 level.”
Yet other analysts think gold’s best days are behind it after a multiyear rally to historic prices. Goldman Sachs commodity analysts introduced a new call: gold at $1,200 an ounce by 2018. [Has the Gold ETF Bull Market Run Its Course?]
Gold futures currently trade around $1,690 per ounce.
Larkin outlines five reasons why the S&P analysts are bullish on gold for 2013:
  • Near-Zero Interest Rates. The Federal Reserve has stated it will maintain low rates through 2015. “We see no opportunity cost for buying and holding gold anytime soon,” Larkin said.
  • Stagnant Supply. Global mine production has been flat over the past decade. From 1999 through 2011, global mine output rose at a compound annual rate of 0.6%. “We believe production will remain stagnant for the next several years, as old mines are becoming depleted and are not being replaced to the extend needed to significantly lift output,” Larkin said.
  • Volatile Forex Market. The S&P analysts believe that volatility in major world currencies will drive demand for gold as a safe store of wealth. Moreover, Larkin thinks that other countries will also begin to shift out of the U.S. dollar and into gold.
  • Quantitative Easing. “We think that gold will rise in all currencies due to the implementation of quantitative easing by central banks worldwide,” Larkin added.
  • U.S. Money Supply. Larkin also points to the U.S. monetary base and M-2money supply as the catalyst for rising gold prices this year. “A resumption of strong money supply growth will boost the gold price,” Larkin said.
Sumber : ETF Trends

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