The investing world is full of forecasts. Every analyst, investment bank and brokerage house sets forth their opinion to the investing world and tries to gauge the future. In the gold sector, it's no different. Predictions of $5,000 or even $10,000-an-ounce gold are now hitting the press wires. While most of these predictions may turn out to be "too good to be true" (remember Dow 36,000?), it does pay to follow the advice of a few sound managers or analysts who have proven success. One such manager, with a history of outperformance, recently offered his take on the gold sector.
Investopedia Markets: Explore the best one-stop source for financial news, quotes and insights.

Large Rise in 2012
Guiding his fund to a 26% annual return over the last 10 years, John Hathaway certainly knows his way around the gold markets. The Tocqueville Gold (TGLDX) features a Morningstar four-star rating and has been one of the better performing precious metals funds since its inception in 1998. Hathaway's latest missive on where gold prices could hit in 2012 is enough to make any gold bug happy.

The fund manager believes that continued efforts to stimulate souring economies in both Europe and the United States will push gold prices closer to $3,000 an ounce by the end of 2012. Currently, gold sits around the $1,700 mark. In his report, Hathaway said, "The market reaction to this financial crisis on both sides of the Atlantic is a necessary, but painful, prologue for gold to reach new highs, which we believe could probably be well above $2000 and maybe even $3000." Ultimately, the fund manager believes that more monetary and fiscal stimulus by various governments will equal printing money. The resulting inflation coupled with "breakdown of confidence in paper currencies linked only to political agendas," will serve to support higher gold prices in the future. (For related reading on gold, see The Gold Standard Revisited.)

Hathaway also cites that there is only about $2 trillion worth of investment in gold, or approximately 1% of all global financial assets. This, plus the recent divergence in gold prices versus the stocks of miners, makes those firms that dig the stuff out of the ground increasingly compelling.

Playing Hathaway's Bullish Stance
With a solid track record in the sector, investor's may want to take Hathaway's advice and add some gold exposure to their portfolio. Aside from adding his fund to a portfolio, the SPDR Gold Shares (NYSE:GLD) is still the largest and easiest way to add direct exposure to rising gold prices. However, as the manager says, "If one believes that the current gold price is sustainable, the historically high discount between the shares and the metal represents a compelling opportunity," then a bet on the miners could be in order.

Tocqueville Gold's largest miner holding is in Goldcorp (NYSE:GG). The firm continues to offer one of the lowest costs of production for the precious metal and higher gold prices have translated into higher earnings. The company reported an 88% increase in earnings for the third quarter and recently increased its monthly dividend. Goldcorp currently yields 0.8%.

Higher gold prices should benefit investors in Newmont Mining (NYSE:NEM). Back in April, the firm reported that it would link its dividends to the price of gold to attract investors. Newmont's current yield sits around 2%, but the miner has raised its payment during the last quarters. As higher gold prices persist, investors could be rewarded with continued higher payouts. Additionally, both Barrick Gold (NYSE:ABX) and Freeport-McMoRan (NYSE:FCX) offer strong yields. (For related reading on gold, see Getting Into The Gold Market.)

The Bottom Line
For investors, honing in on top managers or analysts' forecasts could lead to major profits. In the gold sector, John Hathaway has guided his fund to outstanding results over the last few years. His latest report gives insight into his predictions of $3,000 an ounce gold. Betting on physical prices via the ETFS Physical Swiss Gold Shares (Nasdaq:SGOL) or the previous mining stocks, could be great investments.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

At the time of writing, Aaron Levitt did not own shares in any of the companies mentioned in this article.

Related Articles
  1. Professionals

    Are ETFs a Good Fit for 401(k) Plans?

    The popularity of ETFs among investors and advisors continues to grow. But are they a good fit for 401(k) plans?
  2. Stock Analysis

    Will WYNN Continue to Rally?

    Wynn Resorts has experienced a rally recently. Will it remain a good bet?
  3. Stock Analysis

    Don't Be Fooled by the Market's Recent Rally

    The bulls won for a bit in early October, but will bears have the last laugh?
  4. Stock Analysis

    Will Twitter's Stock Find its Wings Soon?

    Twitter is an enigma to many investors, but its story is pretty straightforward.
  5. Investing Basics

    How to Think About Seasonality Trends

    Investors benefit when company research incorporates seasonality trends that predict relative strength and weakness throughout the calendar year.
  6. Chart Advisor

    These 3 Charts Say Now Is Not The Time To Buy Commodities

    Traders are turning their attention to the charts of commodity stocks to get a better idea of the future trend. We'll take a look at three stocks from different segments of the basic materials ...
  7. Mutual Funds & ETFs

    The Top Vanguard Emerging Market ETF

    Learn why growth investors should consider investing in VWO's portfolio of emerging market stocks.
  8. Stock Analysis

    8 Solid Utility Stocks for a Bear Market

    If you're seeking modest appreciation, generous dividend payments and resiliency, consider these eight utility stocks.
  9. Investing Basics

    How to Pick the Best Muni Bonds and Muni Bond ETFs

    Municipal bonds are a good addition to a diversified portfolio as long as you choose correctly based on population and local economic trends.
  10. Stock Analysis

    Why Phillips 66 (PSX) is a Solid Long-Term Bet

    Here's why Phillips 66 will likely remain one of the world’s largest and most profitable companies for a long time to come.
  1. Can mutual funds invest in IPOs?

    Mutual funds can invest in initial public offerings (IPOS). However, most mutual funds have bylaws that prevent them from ... Read Full Answer >>
  2. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  3. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  4. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  5. Does index trading increase market vulnerability?

    The rise of index trading may increase the overall vulnerability of the stock market due to increased correlations between ... Read Full Answer >>
  6. What does a high turnover ratio signify for an investment fund?

    If an investment fund has a high turnover ratio, it indicates it replaces most or all of its holdings over a one-year period. ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!