Gold's fundamentals look very much like 15 years ago, says investment firm

Author: Paul Ploumis20 Aug 2014 Last updated at 01:46:43 GMT

EDGWARE (Scrap Monster): Tocqueville Asset Management sees gold’s fundamentals very much like what it was fifteen years before. According to John Hatahaway and Douglas B. Groh, the gold’s set up is very much similar to what was experienced in 1999. During that time, gold was at the end of a 20-year bear market. Today, the huge drop in gold prices from a high of $1900 per ounce to less than $1200 per ounce in a short span of 2.5 years makes it a similar case, they observed.

According to them, geopolitical issues away from the headlines influence the demand for gold. Europeans are probably more conscious of gold today than they might have been six months ago. People want to get their wealth in a safe place. That will reinforce demand for gold as time goes by.

The decline in the gold price these last three years has been destructive for mining companies. It has caused them to rethink their business models and their capital spending plans. It's become more difficult for companies to raise capital to move forward. The mining companies worldwide are passing through a consolidation phase. Investors should consider opting for an exposure in gold mining companies that are well-managed and have with good assets.

The gold futures chart suggests that the bottom in gold has been completed and the downward momentum has been exhausted. However, the confirmation of the bottom will come only when gold trades consistently above $1400 per ounce.