Read the companion article from TheStreet.com: Gold Prices: Where Will They Finish 2012?.
GHARIB: Gold prices fell almost $9 today to $1608 an ounce. Prices have been falling in recent weeks, but investors are hoping gold will regain its luster in 2012. Our next guest says gold bugs expect prices to rally more than 20 percent in the New Year to about $2,000. Tonight`s “Word on the Street” is gold and joining us now, Alix Steel. She`s markets reporter at thestreet.com. Hi, Alix, nice to have you with us. Happy New Year.
ALIX STEEL, REPORTER, THESTREET.COM: Good to be here.
GHARIB: So you have been talking to a lot of gold experts. The ones that are predicting a gold rally, what did they see is going to drive prices higher?
STEEL: The biggest factor is actually going to be a weaker U.S. dollar. The dollar and gold tend to move inversely to each other so when the dollar is weaker, investors don`t feel very good about the paper currency so they go to a hard asset and a good place to store their wealth. Now obviously the Eurozone get issues have been taking center stage. If Europe is able to resolve their issues and a spotlight is shined on the U.S., we might see that our debt issues are no better than say Greece for example. If that happens, the dollar will fall off and gold could rally.
The other big thing is perhaps quantitative easing, will central banks like the Federal Reserve pump more money into the system? Many analysts think that will happen in the first quarter or second quarter of this year.
And the third reason is going to be central bank buying. They bought about 344 tons of gold in the first 11 months of last year. That is huge and a key support for high gold prices.
GHARIB: All right. Let`s look at the flip side because there are others that are saying that gold prices are going to pretty much stay where they are right now through the rest of the year. So what`s the thinking there?
STEEL: Yeah, absolutely. The worst risk here is actually just sentiment. I mean it was a very volatile, very scary year in 2011 for gold investors. You had gold plummet 18 percent from its intraday high of $1923 to its closing price of 2011, $1566. That`s leaving many investors, many big name investors on the sidelines and gold really needs them to come back into the market in full force. Also gold not really trading as a safe haven right now.
GHARIB: Let`s move along because we have less than a minute. And you have some names of gold stocks for those people who are interested in investing, that you have heard from some our sources so let`s talk about some of them. At the top of your list you have Barrick Gold (NYSE:ABX), ABX. What is the thinking there? Why would this make sense and then we`ll quickly run through the other two.
STEEL: Barrick Gold (NYSE:ABX) is really the safety gold miner, if you are looking for that kind of risky play, a 12 percent growth profile over the next five years and a dividend. Doesn`t have sexy growth but it has nice stability.
GHARIB: And then another one Gold Corp. This is GG trading here off the NYSE. Why is that popular?
STEEL: Because this has a sexy growth. This is going to grow about 70 percent. Its gold production will grow 70 percent in the next five years. That is huge. But in order to do that, it has to bring forward about six gold projects. There is a lot of room for risk, a lot of room for error there.
GHARIB: And in a few words Novagold Resources, NG, up 2 percent today.
STEEL: Yeah, junior gold miner won`t have any gold produced out of the ground until five or six years, but could be a takeover target, very risky but very interesting play here.
GHARIB: All right, thanks a lot, lots of information. Do you own any of these stocks personally?
STEEL: As a reports I cover them, I can`t, unfortunately.
GHARIB: I know the feeling. Thanks a lot, Alix. It`s great having you. And we`ve been speaking with Alix Steel. She`s markets reporter at the street.com.