Mine supply is a bigger threat to gold, than U.S. rate hikes - Video

The main reason investors abandon gold now seems to be a looming U.S. rates increase, however one influential analyst suggests there is a bigger threat to gold. It is mine supply that will keep growing.

"Those familiar with our research will know that we aren’t especially optimistic about gold in the short term because we think that it’s driven by mining supply to a much greater extent than most people realize, and that mining supply, in our view, is likely to continue growing," said Erik Norland, a senior economist at CME Group.

Apparently, with this view the group finds itself in the minority.

"Many analysts think that gold-mining supply is likely to come down significantly in the next few years. If mining companies begin shutting down production, it would be bullish for gold," he explained. Inflation is also not a major problem ahead and in turn should continue to pressure gold prices, the economist noted.

According to Norland, historical data still proves that gold remains a great portfolio diversifier and his short-term, apathetic sentiment towards the metal is shared with equities and bonds.

"We wouldn’t be surprised if fixed-income returns are close to zero or even negative, after inflation, over the next decade or so," he said, adding that equities draw a more complicated picture.

"Corporate profits aren’t growing very quickly and with the Fed apparently getting ready to hike rates, the cost of capital might begin to increase slightly," he noted. Equities in Europe and Asia, on the other hand, are cheaper and may outperform the S&P 500 in coming years, particularly if the U.S. dollar remains strong, he added.