The price of gold peaked above US$1800/oz. in mid-2011— an all-time high – then slid to US$1,050/oz. in December 2015. It has run up an 18.3% gain from the start of 2016. As a “safe haven”, gold attracts investors fleeing volatile capital markets, underpinning the year- to- date price surge when jitters surfaced from the commodity crisis, slower growth in China, negative interest rates in Europe and Japan, and, more recently, a weakening US dollar. Gold also jumped sharply higher last Wednesday when the US Fed announced plans to shelve its 2016 four interest rate hike plan, in favour of two. The Fed wasn't only cautious about the health of the US economy but also warned “global economic and financial developments continue to pose risks”. Interest rates near zero are beneficial to gold, as it is not yield-producing. On Wednesday, the Fed also said it's keeping its target of a federal funds rate between 0.25% and 0.5%. While the upward trend for US interest rates may be stalling, a few developed economies have moved monetary policy into uncharted territory with negative interest rates. The imposition of negative rates is a sign of distress, and is bullish for gold. This year started brightly, with gold and gold mining equities all posting sharp gains. This sudden upward move brings much jubilation, with many believing the elusive bottom for the price of gold is now behind us. There is no concensus about the prospects for gold: some pundits predict the recent price bounce could be another false dawn and the decline since 2011 will continue, while many “gold bugs” are predicting a strong bull market with prices surging as high as US$8,000/oz. In 2016, investors are focussed on volatility, which many believe will increase this year, especially given the uncertainty of the US elections and the UK plebiscite about remaining in the European Union: gold has always been an attractive buy in uncertain times. Legendary gold investor Pierre Lassonde says gold prices are heading higher – much higher. “The five-year bear market for gold is over and we are at the beginning of a new bull market,” he told Canada’s Business News Network (BNN) recently. During strong gold bull markets, the price of gold often hits a one-to-one ratio with the Dow Jones industrial average, says the chairman of Franco-Nevada Mining and former president of Newmont Mining. That means gold could surge to US$8,000/oz. or even higher, he says. Mine supply is also at risk. Of the world’s top 10 gold producers, only two expect their minimum level of output to rise materially this year. CPM Group projects that new mine supply will begin to decline noticeably in 2018 — and continue to do so for at least six years. Logical analysis is insufficient to predict the price of gold and related gold equities with credibility, as sentiment and opinion rule the day. Investors would be wise to follow a modest portfolio distribution in gold or gold equities to benefit from a potential bull run, while not unduly suffering if a bear market re-emerges. Gold facts: China has topped the list of gold producers for eight years now. Last year, it produced about 450 tonnes, 30% more than its closest rival, Australia. China and India are the world’s greatest consumers of the yellow metal. Worldwide annual gold production is used about 50% for jewellery, 33% for investing, 14% for central banks and 3% for technological purposes. (Author: Peter Jones, Executive Vice President, Century Global Commodities Corporation)