Gold Rally Could Break $1,500 by Christmas: Investor
The recent rally in gold prices looks set to continue and the precious metal could break above $1,500 before Christmas, John Meyer, head of resources at Fairfax IS, told CNBC Monday.
"Given the run that we're in and the fundamentals supporting that run… maybe we'll head towards $1,400-1,500 before Christmas," Meyer said.
The main factor driving the price higher is the ultra-low interest rates in the U.S. and Europe, according to Meyer. But a lack of gold selling from the central banks is also having an impact, he said.
"Central banks have stopped selling gold… or if they're selling, they're just trading it amongst the central banking community. And that means that 400 tons a year is not available for supply for jewellers and other investors," he said.
Suki Cooper, commodities analyst at Barclays Capital, told CNBC last week that investment demand for gold remained strong, which was also supportive of prices.
The price of gold hit a new all-time high Monday of $1,283.35. The recent rise has lead some market watchers to warn of a bubble building in the metal price.
As well as owning physical gold and buying into exchange traded funds, Meyer pointed out that gold-mining stocks are a good way to get exposure to the metal.
Shanta Gold, which is developing two gold mines in Tanzania, is an attractive stock, according to Meyer.
Meyer's favorite stock in the sector is Australia's Ampella Mining, which he described as: "one of the most exciting stocks in the world right now."
He thinks the company could be set to see its capitalization more than double. Carbine Resources is also a stock on Meyer's buy list.
Meyer warned that when stock markets turn lower, mining stocks can be hit quite hard. He also said that investors should only pick companies with good management in place.
Fairfax IS owns shares of Shanta Gold, but does not own shares of Ampella Mining. Disclosure on Carbine Resources was not immediately available.