GLOBAL - Institutional investors worldwide are set to ramp up their investment to gold in the coming months and would do well to increase their exposure to as much as 5-10% of their portfolios, according to Erste Bank's Ronald-Peter Stöferle.
Speaking to journalists in Vienna, the analyst said: "Institutional investors will shape the next phase of the gold bull market."
According to his figures, only 0.15% of institutional assets are currently invested in physical gold, and the metal only makes up 7-8% of large commodity indices.
Stöferle cited academic research in which a 5-10% direct and indirect allocation to the asset class was recommended.
"Institutional investors are slowly starting to buy gold," he said, adding that there was still a relatively cautious investment climate regarding the asset class and that most investors were still wary of a bubble.
However, Stöferle said he did not see any overheating in the gold market for a number of reasons.
"The end of a bull market is characterised by analysts surpassing each other with price expectations, and when the last gold bubble burst in the 1980s, there was a real euphoria in the market and in the media," he said.
The analyst also presented data according to which gold could be at a much higher price if the Bretton Woods system were still in place.
He estimated that gold would reach $2,300 (€1,590) per ounce before the market collapsed, equalling the inflation-adjusted price peak from the 1980s, as "every bull market ends in excesses and exaggeration".
As for gold-related equities, he predicted an end to the high correlation these securities saw with other equity markets in recent years, as gold is becoming "politically correct", and various states are thinking about monetising it.
For Stöferle, China, India and Russia - where many investors were "virtually excluded from the last gold boom" - will be the main drivers of future price increases.