New Year events signal optimism in the gold sector, says Junior Gold Fund’s Damaskos

Angelos Damaskos, CEO Sector Investment Managers and fund advisor Junior Gold Fund, says evidence from 2012 thus far suggests gold could continue its upward price trend for another year.

Year to date, the gold price seems to have resumed its eleven-year uptrend. Although gold shares underperformed the commodity price throughout 2011, there is a distinct possibility they will outperform it in the year ahead.

The industry spent most of last year debating the valuation gap between the price of gold and the market prices of quoted gold mining stocks. Most observers agree that this anomaly was due to the general risk aversion towards less liquid, more volatile stocks in times of instability.

Whilst junior mining shares suffered more than the sector due to poorer liquidity, it appears that the New Year has started with some optimism and a recovery of share prices. Indeed, Europe remains in turmoil, with its leaders scrambling to find a solution to a seemingly insoluble problem. Some smaller member states, like Greece, are unable to service their debt obligations and time is running out. It seems that the central banks, the ECB and other multi-lateral bodies will have to print record amounts of money to bail out the weaker member states and those financial institutions with large exposures to sovereign debt. This is likely to devalue the euro and strengthen the appeal of gold as a store of value.

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