Can gold prices go higher? What are its long-term prospects? In this excerpt of the On the Trading DeskSM podcast from Friday, November 18th, 2011, Peter Nulty talks with Melissa Duller, CIMA®, investment analyst with Wells Fargo Funds Management, LLC. Melissa is the author of the white paper "Why gold may have a long-term place in investors' portfolios."
Click here to listen to the full interview.
Let’s answer the first question: Is there room for gold prices to go higher?
I think there is certainly a case to be made for gold prices to go higher. We continue to see a rising middle class in the developing world. At the same time, economic weakness among developed nations and issues surrounding the debt crisis in Europe have created uneasiness and a sense of uncertainty. Since gold has historically been seen as a store of value, it has become increasingly attractive. And given global dynamics and trends, gold prices could continue to move higher.
Are there any other factors driving gold?
In the developing world and countries, such as China and India, gold is a significant symbol of wealth and is given as gifts for weddings and special occasions. Also, it’s an investment hedge against inflation in these faster-growing nations. And gold is an investment alternative to assets such as real estate, which is often seen as being over-valued, or as an alternative to stocks, which, depending on the exchange, may be subject to heavy government influence. From a developed nation standpoint, investors are especially fearful about the future and are seeking a hedge against potential instability in the traditional equity and bond markets as well as the economy. Some fear that if we see a significant increase in money supply, partly due to government spending, it could lead to currency devaluations. So, what we’ve got here is increased demand of a commodity that is in limited supply.