PRESS RELEASE
Oct. 10, 2011, 2:43 p.m. EDT
Is Gold Undervalued? Goldline CEO Scott Carter Says Macroeconomic Conditions, Supply/Demand Factors Are Still Supportive of Higher Prices
SANTA MONICA, Calif., Oct 10, 2011 (BUSINESS WIRE) -- While gold prices have increased every year for the past ten years, the yellow metal could still be undervalued and see further appreciation, according to Scott Carter, CEO of Goldline International, one of the largest retailers of physical precious metals in the U.S.
"Multiple factors -- many relating to the precarious state of the American and European economies -- continue to support gold prices just as they have for the last decade," Mr. Carter said. "In addition, a number of industry forecasts call for gold prices to increase above their current level as well as the recent peak price. Of course, no one can say for sure what the future holds, but we believe that precious metals should be considered as part of any long-term portfolio diversification strategy."
There are a number of fundamental reasons why the price of gold could continue to increase, according to Mr. Carter. Among them...
Gold still hasn't exceeded its previous peak price. Despite seeing gold prices increase over 450% since August 2001 and more than 10% in 2011 alone, gold is still below its inflation-adjusted high set in 1980 (roughly $2,300 per ounce in today's dollars).
Respected analysts forecast higher prices. J.P. Morgan and Citigroup see gold prices increasing to $2,500, while Standard Chartered Bank says central bank purchases and demand in China and India could push gold to $5,000 per ounce in the coming years. A poll of 530 delegates attending the London Bullion Market Association's annual conference in September 2011 found that their average expectation was for between $2,019 and $2,075 per ounce for gold by November 2012.
Macroeconomic and geopolitical uncertainty. Economic uncertainty in the U.S. and Europe, political uncertainty in the Middle East, and other concerns may continue to prompt investors to acquire gold as a "safe-haven" asset.
Monetary policy and U.S. dollar weakness. Current monetary policy, which is designed to stimulate the economy by keeping interest rates extremely low, could translate into a weaker dollar and higher inflation in the future. This type of environment is driving more investors to seek out gold.
Central banks are purchasing gold. Just a decade ago, central banks were net sellers of gold. Since 2009, they have become net buyers as they take steps to cope with volatile global financial markets and the pace is accelerating. The central banks of Russia, China, India, Mexico and Thailand, among many others, have added to their gold reserves since this time. These acquisitions reduce supply in the market and put upward pressure on the price of gold.
Supply and demand dynamics. According to a recent Standard Chartered Bank report, gold mining production hasn't kept pace with demand during the 10-year gold bull market. For example, if China were to increase its gold reserves to the global average of 11% of its foreign exchange reserves, it would have to buy the equivalent of more than two years of global gold production, according to the study. Despite its recent buying spree, China still has only 1.8% of its foreign exchange reserves in gold.
"As is true with many asset classes, trying to time a top or bottom of the market for gold can be nearly impossible. With that caveat, there still appears to be considerable growing room for the price of gold. We believe gold is worth considering as a component of a long-term portfolio diversification strategy," Mr. Carter said.
About Goldline International
Goldline International is one of the largest companies providing physical precious metals to collectors and investors in the United States. Founded in 1960, Goldline is headquartered in Santa Monica, CA with over 300 employees and annual sales exceeding $500 million. In 2011, Goldline was recognized by Inc. Magazine as the #6 fastest growing company among private companies with more than $500 million in annual revenues. For more information about the company or how to buy gold, please call 800-827-4653, visit goldline.com and follow Goldline on facebook.com/goldline or twitter.com/goldline.
SOURCE: Goldline International
