Mostly: Classical

[amarksp]

martin m

Martin Murenbeeld, of M. Murenbeeld & Associates Inc., cites numerous reasons why "the gold price is likely to be in a bull market for some years to come."

First of all, there is little new supply. Exploration waned during the 1990s as real gold prices fell sharply, and mine output is unlikely to rise significantly for years to come, Murenbeeld says.

But new production isn't the major factor influencing gold. While mines churn out about 2,500 tonnes per year, there are about 30,000 tonnes of gold sitting in central bank vaults, and 15 of those banks have agreed to limit gold sales, Murenbeeld says.

On the flip side, some central banks are rumoured to be looking at buying gold to diversify their assets. For example, only 1.2 per cent of China's reserves are currently made up of gold.

At the same time, many economists expect the US dollar to decline. "Historically, all else equal, the dollar price of gold rises as the dollar itself weakens," Murenbeeld says.

Finally, demand continues to expand.

Last year, demand for gold jewellery rose five per cent to 2,736 tonnes, industrial demand rose two per cent to 419 tonnes, and investment demand rose 26 per cent to 600 tonnes, according to the World Gold Council.

"The fourth quarter in particular saw substantial inflows of institutional investment into gold," the council stated. "Investment in Exchange Traded Funds increased by 79 tonnes during Q4 alone and it is estimated that other institutional investment in the period approached 200 tonnes."