CAPE TOWN (miningweekly.com) - A rise in the gold price to $2 300/oz "would not be surprising", US Global Investors portfolio manager Ralph Aidis said on Wednesday.
Aidis told the Mining Indaba in Cape Town that, if history was an indicator, there might be only five more months of recession.
Aidis said, too, that it was not commodity demand that had fallen but rather the inability of shippers to secure credit from stricken banks to finance the deliveries of the commodities.
"The dramatic correction has delayed but not destroyed the 20-year commodity cycle," Aidis said.
The world had many economic stimuliscoming through in addition to seasonal cycles, with gold demand building from August.
US Global followed government policies, as these drive markets, and the US Senate was voting to permit the shorting of stock on a downturn.
To make it easy to short, was a policy change that had contributed to the current economic impasse.
Then Lehman Brothers was allowed to fail by government policy, which was a "pretty dramatic mistake" because the commercial paper market also froze, banks stopped lending to one another and the market collapsed.
"If you plotted gold, the gold price went to its biggest extreme in 15 years inverse to the dollar and prompted people to get some gold in their portfolio," he added.
There were strong signals that gold should be added to investment portfolios.
While in the short term the gold price could pull back, gold was still a fairly safe investment in the longer term.
"It would not surprise me", Aidis said, if the gold price rose to $2 300/oz.
He said that the current recession had been under way for 13 months, while economic recessions since 1945 had averaged ten months, with the longest being 18 months.
If history was anything to go by, the world might thus have only five more months of recession remaining.
There might be more lay-offs of employees as various companies downsized, but the overall economy and the market might turn up in five months as banks put money back to work and governments spent on infrastructure projects.
