Charles Gibson, mining analyst at Edison Investment Research , has predicted that gold could be poised for the second leg of a bull run after a brief recent hiatus. His premise is that world events, though extraordinary, are not without precedent: structural trade deficits, burgeoning budget deficits and bank failures were equally prominent in the 1970s. During that decade, gold rose from $35/ounce to its only recently surpassed record of $850/ounce - a 24-fold increase. While not expecting such a dramatic appreciation this time, should gold repeat the cycle of the 1970s it could average over $1,000/ounce over the next 21 years, with a short-term peak of over $1,567/ounce.
Indeed gold has been back in favour with investors this week as the bear market rally appeared to be running out of puff and this, coupled with an actual physical shortage of gold, has led some to predict another bull phase for the precious metal. Against this background, Mr Gibson has applied a new valuation methodology to identify investment targets. Gold companies have traditionally been valued using a benchmark of $35 per ounce of resource.