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Gold prices still have plenty of room to rise

Market experts have not exactly been unanimous; nevertheless, the consensus has been that, in the long term, gold will continue its current 11-year bull run, with 2012 seeing prices of $2000 and beyond. The last few months have seen many corrections in the precious metals market but gold has risen some 18% this year alone, despite recent volatility.

The long-term view is important; gold serves, ideally, as an insurance policy for wealth protection and arguably works best as a medium- to long-term investment. A quick illustration of just how good an investment gold has been over the last decade, compared to, say, real estate, is sobering.

This illustration is based on property doubling in price since 2001, something that is certainly not true in many parts of the US. Assume that you put $100,000 as a down payment on a home in 2001 with a mortgage of $200,000. Now assume you had rented a similar home for the same period, spending the equivalent of the property taxes, mortgage payments and maintenance you would have paid on your own home, and had invested the $100,000 in gold (at around $200 an ounce) instead. Your home would be worth (optimistically) $600,000 with an outstanding mortgage, very approximately, of perhaps $120,000, giving you a net worth of $480,000. However, the gold you bought for $200 an ounce would now be worth $850,000! Of course, you would have missed out on the joys of home ownership but still the figures are thought provoking.

“We all know that past performance does not guarantee future performance,” says Bill Hionas of Pan American Metals of Miami. “However, gold bullion continues to outperform other assets in the long term and gold prices still have plenty of room to rise.” Source: Pan American Metals

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Posted by on Nov 23 2011. Filed under Gold predictions. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

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