The market is still at an early stage of a bull run for the mining industry and gold in particular, according to Ronald-Peter Stöferle, managing partner with asset management firm Incrementum AG.
Stöferle said at the Mining Investment Asia on March 29 in Singapore that tailwinds for gold include inflows for exchange-traded funds picking up, stirring inflation momentum, a portfolio diversification trend among miners and investors, and policy uncertainties around the globe.
He divided a typical gold boom into three phases: the accumulation period, with some investors buying against the general market; the public participation period, where analysts raise price targets with increased trading volume; and the distribution period, where investors liquidate investments they made in phase one.
"The industry is at the beginning of phase two as we see more investor participation and media coverage [on a gold boom]," he said.
But analysts are still very cautious about price forecasts, despite price recovery since last year, Stöferle told S&P Global Market Intelligence on the sidelines of the event.
He added that gold has risen about 8% so far this year on U.S. dollar terms and recorded increases in every major currency, though trading from the institutional investors has been very thin.
"Investors will come back for gold," he said. "I think we still have six to seven years until the end of the bull run and the inflation will be the biggest supporter for it."
"A big inflation surprise can happen anytime, within a very short time frame," Stöferle said, citing historical data on the correlation between gold prices and inflation rates in the 1940s and 1970s.
Stöferle pointed out that the U.S. economy is not in a good position, as many companies only survive because of the low interest rates.
"The market is in the hopes of massive fiscal stimulus from the U.S. government, counting on Trump's ability to quickly turn around the economy," he said.
Gold is a systemic hedge against inflation as the central bank's ability to heal the economy through monetary policies has been in question, according to Stöferle.
Stöferle's comments were backed by a panel discussion, where four fund manager panelists outlined expectations for gold prices to rise this year.
Meanwhile, Stöferle also warned of potential headwinds for gold, referring to oil rolling over, relative weakness for silver, a lack of volatility in financial markets and a potential rally of the U.S. dollar.