Erste Group: Gold rush not yet over

Erste Group analysts expect the price of gold to surpass 1,000 dollars/ounce in the second half of 2009, as investors see gold as a safe play. Erste Bank has also set the long-term price target at 2,300 US dollars/ounce, a recent Erste report shows.

“We continue to see an outstanding risk/return profile for gold investments. We regard the current consolidation as good buying opportunity and envisage higher gold prices in the medium to long term. The infamous USD 1,000 per ounce threshold should be clearly passed again in 2009 - USD 1,300 is our first target,” explains Ronald Stoferle (photo), International Equities analyst at Erste Group.

Gold closed the year 2008 with the eighth annual increase in a row. And in the year to date, the performance has been outstanding as well: the gold price has recorded an increase of 7% (in US dollars) and 8% (in euro), respectively. Moreover, it set new all-time highs in the euro, British pound, Canadian dollar, South-African rand, Russian rouble, Indian rupee and many other currencies.

Commodities are generally benefiting from such a scenario, and oil and gold in particular. “This is why we continue to recommend gold as panic-proof component of asset allocation and as longterm advisable way of protecting purchasing power,” Stoferle added.

Currently, the gold experts at Erste Group recommend investing 5% to 10% of assets in the precious metal.

“More than ever, we consider the gold price in a secular upward trend, and we believe that we have onlyseen about half of the full swing so far – the most impulsive phase is yet to come. Commodity and precious metal cycles tend to take particularly long, at least 15 to 20 years. Given that the most recent bull market started only in 2001, we have only come through half of the cycle yet. This would make our price target of USD 2,300 at the end of the cycle appear more realistic than ever,” the Erste Group analyst concluded on gold’s prospects.

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