“Gold miners have never been this cheap, and greed and fear are the two factors that drive share prices. If gold breaks its previous high you’ll see the stocks in the sector run hard.”
There is a lot more to it, but once the market stops factoring in increasing costs of production, and believing that the gold price to be a bubble, it’s off to the races, according to Baker, who does not present as a diehard optimist.
The gold price is hovering around US$1724 an ounce, which is just over 10 per cent below its high. If it does reach its high, this is all the return that is on offer for gold exchange traded fund (ETF) holders. In contrast, Baker, who runs the biggest gold fund in the world, estimates that his fund would run up more than 40 per cent if this happens.
Moreover, this could happen sooner, rather than later.