Hong Kong: Gold prices may rise to $5,000 (Rs2.15 lakh) an ounce as investors seek to protect themselves against accelerating inflation, said Schroder Investment Management Ltd, which oversees $277 billion of assets globally.
“You could easily see for the next several years that prices rise not to $1,000 an ounce, but prices rise to $5,000an ounce or beyond as inflation psychology becomes more and more embedded andpeople become desperate to have a source of value,” said Christopher Wyke, emerging market debt and commodities product manager at London-based Schroder Investment Management, which oversees about $10 billion of commodity assets.
Investors are turning to gold for protection as two-thirds of the world’s population cope with inflation rates that are climbing to more than 10%, Wyke said.
Cash and inflation- linked bonds are poor substitutes as low interest rates, coupled with surging inflation, erode the real value of assets, he added.
Bullion was trading around $890 an ounce on Thursday. Schroder Investment Management didn’t give a time frame for its prediction on gold.
Demand for gold will also rise as central banks become net buyers for the first time in 20 years, driven by developing countries, Wyke said.
Last year, world production of gold sank to the lowest since 1937 as reserves are depleted and few new sources of gold have been found.
Wyke was speaking at a press conference in Hong Kong on Thursday to market the Schroder Alternative Solutions Gold and Metals Fund, the first commodity fund authorized for sale to individuals in the city.
Robert Howell and Paula Bujia will manage the fund.
Gold may account for about 40% of the fund’s assets, based on a “model” fund used to simulate returns, said Wyke. The fund would also buy securities linked to metals including aluminium, copper, iron ore, zinc and uranium.
The limited amount of gold available, relative to the size of the global capital markets, means a small shift in investments may lead to significant price changes, Wyke said.
Total gold above ground is worth about $4.8 trillion, compared with global stock and bond markets worth $135.2 trillion. Bloomberg