Physical gold demand is likely going to increase, says an influential financier. Felix Zulauf began his nearly 40-year investment career working for a large Swiss bank as a trader. He was trained in portfolio management and financial research and has worked for leading investment banks in major global markets.
After working for the Union Bank of Switzerland, Zurich, for several years and serving on the executive board of a medium-sized financial organization for two years, he founded Zulauf Asset Management.
From 1990 to 2001, Mr. Zulauf grew his company, eventually selling it to two staffers-turned-partners in 2001. Acting as an advisor since 2002, he was perfectly positioned for the spring 2009 split of Zulauf Asset Management and now owns Zulauf Asset Management AG.
Mr. Zulauf recently sat down with James J. Puplava, president and chief investment strategist at PFS Group, to talk about the stock market and all things golden…the precious metal, that is.
What Felix Zulauf Believes About the Future of Physical Gold
Mr. Zulauf believes that everyone should own the physical form of this metal. He believes the price of the commodity will increase to two to three times its current level. He is also very clear about the difference between paper and physical forms of the metal. If everyone follows his advice, physical gold demand should increase.
The remainder of the decade should mirror the roller coaster ride that we have experienced over the past two years.
Stimulus generates economic activity, which will eventually wear off and the markets will soften, requiring some form of correction. January has been stronger than expected but late within the first quarter or early in the second quarter, a change should take place. This will result in a correction through the late summer.
Gold is one of the three investments that Mr. Zulauf recommended in a recent Barron’s interview.
This year, gold is up 12 percent, representing its 12th consecutive year of gains. Experts have shown that they have trouble understanding this precious metal. Gold is one of only two markets where the highs are consecutively topped each year.
Looking for an Inflationary Safe Haven
According to Mr. Zulauf, what is going on with this precious metal is different than what is taking place in the bond market. Gold represents one of the few escape from a problematic situation of money printing. The other examples of escapes have, so far, been farmland, commodities, and other hard assets like silver.
As more paper money is created, inflation comes into play. As this currency floods the market, the price of the precious metal expressed in this currency increased. This happens because we are unable to create as much of the metal each year as we can create paper currency.
Therefore, physical gold demand will continue to increase as long as central banks print money at the current rate. Eventually, the balance sheet of these banks will reach GDP levels, which means the price of the metal expressed in those currencies has a long way to go. China and India gold demand are also major factors to focus on, as these developing countries are known for being fond of the precious metal.
Mr. Zulauf qualified this by saying that 2012 may be “tricky” because market changes during the second half of the year could lead to renewed deflationary fears. Therefore, the metal may experience a longer consolidation. He noted that the current rally could merely be an “interlude” within a long-term congestion according to Financial Sense. Mr. Zulauf recommended that everyone own this metal as a long-term investment and anticipated that the net opportunity to buy would occur during the summer.
More investors are realizing that the central banks are cheating them and if they switch a small percent of their savings into this precious metal, this would greatly affect physical gold demand and thus, the price.
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