Looking forward over the next few years, we would guess that two of the most outstanding investments will be gold mining shares and alternative energy. Our access to these opportunities is via the Merrill Lynch Gold and General Fund and the Merrill Lynch New Energy Fund. As we have said before, Merrill Lynch seems to have hijacked this whole commodity-based market for their own.
According to the World Gold Council, last year annual gold sales rose 16% to $53.6bn, the first time they have broken above the $50bn level. This followed a sharp increase in demand from investors, jewellery and industrial users. Of that figure, $39bn in gold jewellery sales reflects the price paid by the jewellery fabricators and not the retail price, which was closer to $80bn. Jewellery sales again exceeded the total annual gold mines output, with the balance of gold supply coming from a 41% increase in Central Bank sales to 663 tonnes.
The consolidation/retracement underway since the high of $574.6oz on 2nd February was inevitable before gold heads towards our next big target of $1,000. Whilst Central Banks persist in inflating the money supply, which we expect them to do, gold will continue to benefit. Virtually all major currencies are deteriorating against the gold bench mark.
The rising trend in gold bullion from the beginning of 2002 until early 2005 held perfectly, since when the trend has accelerated. If this new accelerated trend is maintained, and we think there is a good chance it will be, we can, by projecting the trend, estimate that gold might be at $600oz by June this year and at $900oz by February 2008. Slightly tongue-in-cheek perhaps – but nonetheless, in a primary bull market, trends tend to be sustained. In the final year of the famous bull market for gold that ended January 1980, the price moved from $250oz to $880oz.
So the outlook for MLG&G is outstanding. If gold bullion goes to $1,000oz, MLG&G should go to the moon. Our level for re-weighting is unchanged at bid price 674.60.
Lately, the oil price has eased back, recently below $60 barrel, but the Merrill Lynch New Energy Fund has held at its recent highs, this following an extraordinarily strong period of growth. For various reasons the investment world seems not to take alternative energy as seriously as we think it should. We believe alternative energy investments will benefit irrespective of the oil price as it becomes ever more urgent to develop and expand all possible energy sources. Close your eyes, and imagine the world in 10 years time, with alternative energy playing a major role.
By John Robson & Andrew Selsby at RH Asset Management Limited, as published in the Onassis Newsletter, a fortnightly newsletter that gives insight into the investment markets.
Recommended further reading:
For more on investing in gold mining shares, click here: Why gold miners are set for further gains. A full list of articles on all aspects of gold may be found in our section on investing in gold. For more on investing in alternative energy, see: Finding an alternative to oil.
For more from RHAM, visit https://www.rhasset.co.uk/