Gold could reach $2,000 (£1,256) per ounce after resuming its 11-year uptrend at the beginning of 2012, says Angelos Damaskos.
The value of gold bullion has risen 6.3% since early January – moving from $1,569 an ounce to $1,668 by the end of March.
Damaskos, the chief executive of Sector Investments and investment adviser to the Junior Gold fund, says that although the yellow metal continues to gain strength, gold equities are lagging behind.
He explains: “We have very rarely seen any sector so deeply out of favour as gold equities are now, however we take the contrarian view that current sentiment presents an outstanding buying opportunity.
“Despite high cost inflation, driven by scarcity of materials, equipment and labour, profit growth has been much greater, dramatically expanding profitability.
“Unless gold is heading for a dramatic sell-off, which we believe unlikely, gold mining stocks should soon be rerated to reflect their improving financials.”
Central banks, particularly those of the Bric (Brazil, Russia, India and China) nations, are continuing to diversify reserves by stockpiling gold bullion as the European Central Bank continues to flood the eurozone with liquidity measures.
“This in turn could reduce or limit supply pushing the retail price higher,” adds Damaskos.
The fund also has a 20% exposure to silver producers. Damaskos predicts the margins on silver valuations to widen further too, with a possible trade of up to $35 an ounce achievable against production costs of between $7 and $9 an ounce.