Gold bars
Gold investors and analysts expect prices to rebound from a four-month slump, as central banks, institutions and individuals seek safety from currency devaluations, soaring government debt and volatile stock and bond markets.
Stephen Harris, head of research at Macquarie Capital Markets Canada in Toronto, said gold stocks are his top pick for the year among equities, and that the metal could rise to $2,500 (U.S.) an ounce.
While gold futures have tumbled from a record high of $1,925.10 in September, they ended last year at $1,566.80, rounding out 11 consecutive annual increases during which prices climbed almost sixfold.
Prices surged in late August and September after U.S. political wrangling over the country's rising debt led Standard & Poor's to cut its assessment of U.S. creditworthiness. Investors also feared that Greece would default on its debt payments, potentially inflicting huge losses on European banks and crippling the global financial system. Gold has since fallen and the U.S. dollar has strengthened. A stronger American currency makes bullion more pricey, and therefore less attractive, for international buyers.
"It doesn't matter whether gold ends 2012 at $2,000 or $2,500, because gold's final destination will make today's price seem insignificant," said Nick Barisheff, president and chief executive officer of Bullion Management Group Inc. near Toronto. His forthcoming book is titled $10,000 Gold.
"While central banks have been net purchasers of gold since 2009, the real game changers will be the pension funds and insurance funds," Mr. Barisheff said. "Continuing losses and growing pension deficits will make it mandatory for them to eventually include gold – the one asset class that is negatively correlated to financial assets such as stocks and bonds."
Mr. Harris and Mr. Barisheff made their comments in speeches about the investment outlook for 2012 to the Empire Club of Canada. They spoke on Thursday in Toronto, followed by Fred Sturm, executive vice-president and chief global investment strategist of Mackenzie Financial Corp. in Toronto.
"I urge you to go into this year with reasonable prudence, and adequate hope," Mr. Sturm said, speaking about the general outlook for financial markets.