Commodities | Oct 11 2007
By Rudi Filapek-Vandyck
UniCredit, a subsidiary of the German Bayerische Hypo- und Vereinsbank AG, believes the gold spot price can surge as high as US$1400/oz over the next three to five years.
Commodity expert Jochen Hitzfeld has drawn a comparison with other commodities such as nickel, crude oil and wheat to come to this conclusion. He says prices of other commodities have exploded over the past few years while being supported by three preconditions: continuing supply deficits, low inventories and low price elasticity of demand.
With all three preconditions in place Hitzfeld says commodities such as nickel, crude oil and wheat quickly “oriented themselves” at their inflation adjusted price peaks reached during the last bull market for commodities in the 1970s.
If one were to apply the same principle to gold than spot gold should reach as high as US$1,400 per ounce. Hitzfeld suggests this should be possible on a three to five year horizon. But even if gold were to fall short of this price level, he nevertheless sees the precious metal as a “very attractive” investment and believes it should not be missed in any longer term investment portfolio.
The analyst also makes an interesting observation with regards to gold’s declining production/supply over the past few years. In reference to what he describes as a “relatively new idea”, Hitzfeld suggests gold may simply have reached its final production peak. By definition, this should be the case when 50% of available resources have been mined. According to the US Geological Survey the number is already at 57%, which would support this thesis.