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Gold to puncture $600/oz
Allan Seccombe
Posted: Thu, 30 Mar 2006
[miningmx.com] -- GOLD will break through $600 an ounce and possibly reach $650 this year, market watchers said on Thursday, as gold tore up to fresh 25-year highs fuelled by feverish speculative activity around silver.
“We are looking for gold prices to push through $600/oz this year, but this run is stronger than we anticipated at this stage,” said John Meyer from London-based Numis Securities.
Gold broke the $580 level in London trade, rising 1.2% to $580.54 and bringing its gain for the year to 12%.
“It demonstrates the underlying optimism within the market. There are supply side issues that may affect supply; there is continuing strong demand and the move in other metal prices is pushing gold forward,” he said.
The gold price is still firmly mired in its bull run
Analysts agreed gold was being driven by the flurry of activity in silver ahead of the launch of a silver-backed exchange traded fund (ETF), which has pushed silver up 2.8% to $11.48/oz, a level not seen in more since 1983.
Barclays Plc has proposed the silver ETF, which won partial approval from the US Securities and Exchange Commission on Tuesday. Analysts reckon the ETF could be active within a couple of weeks.
The gold price could push as high as $650 because of an element of short covering, Meyer said.
“There’s hope that the ETF will give silver demand a huge boost,” said Matthew Turner, a commodity analyst at London-based Virtual Metals. “This fever over the silver ETF launch has driven the whole sector.”
The gold price is still firmly mired in its bull run, he said.
“We were quite surprised it got this high and there are certainly no signs that the bull run is over yet. Whether the actual launch of the silver ETF might bring a dose of reality to this, I don’t know,” he said.
A Dow Jones report said the gold price could make a break towards $600 next month, citing the newswire’s technical analyst David Rogers, who said this was a likely scenario as long as oil prices didn’t fall, the dollar didn’t suddenly firm or investors suddenly take their profits in silver.
GFMS CEO Paul Walker suggested this week's interest rate hike decision by the U.S. Federal Reserve could also have fuelled part of gold's upward sprint.
"The U.S. interest rate decision two days ago could be interpreted, in my view, as a somewhat negative signal as to where the Fed sees the U.S. economy. They need to maintain the interest rate differential with other major currencies to keep the flow of funds into the U.S. That is a long-term negative signal for the dollar and where the U.S. economy is going," he said.
One of the constraints on the next phase for the gold price will be the flows of scrap gold onto the market and reduced physical demand from major gold consumption centres like India and the Middle East because of the high prices, he said.
However, fabrication demand will put a floor of $540-$550 under the gold price because demand will kick in if the precious metals hits these levels.
"We are still of the view that in the current market environment. with no other strong economic data to suggest otherwise, gold should be trading in the $540-$550 range," Walker said.
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"The fact that it is pushing higher may well be an indicator that the financial markets are sending signals to the investor group, which is taking a view it is a good time to get into gold."
GFMS expects the gold price to breach $600 in the second half of 2006, but Walker said with the way the price is behaving now it might just be a first half phenomenon.
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This article is a printout from Miningmx.com
Allan Seccombe
Posted: Thu, 30 Mar 2006
[miningmx.com] -- GOLD will break through $600 an ounce and possibly reach $650 this year, market watchers said on Thursday, as gold tore up to fresh 25-year highs fuelled by feverish speculative activity around silver.
“We are looking for gold prices to push through $600/oz this year, but this run is stronger than we anticipated at this stage,” said John Meyer from London-based Numis Securities.
Gold broke the $580 level in London trade, rising 1.2% to $580.54 and bringing its gain for the year to 12%.
“It demonstrates the underlying optimism within the market. There are supply side issues that may affect supply; there is continuing strong demand and the move in other metal prices is pushing gold forward,” he said.
The gold price is still firmly mired in its bull run
Analysts agreed gold was being driven by the flurry of activity in silver ahead of the launch of a silver-backed exchange traded fund (ETF), which has pushed silver up 2.8% to $11.48/oz, a level not seen in more since 1983.
Barclays Plc has proposed the silver ETF, which won partial approval from the US Securities and Exchange Commission on Tuesday. Analysts reckon the ETF could be active within a couple of weeks.
The gold price could push as high as $650 because of an element of short covering, Meyer said.
“There’s hope that the ETF will give silver demand a huge boost,” said Matthew Turner, a commodity analyst at London-based Virtual Metals. “This fever over the silver ETF launch has driven the whole sector.”
The gold price is still firmly mired in its bull run, he said.
“We were quite surprised it got this high and there are certainly no signs that the bull run is over yet. Whether the actual launch of the silver ETF might bring a dose of reality to this, I don’t know,” he said.
A Dow Jones report said the gold price could make a break towards $600 next month, citing the newswire’s technical analyst David Rogers, who said this was a likely scenario as long as oil prices didn’t fall, the dollar didn’t suddenly firm or investors suddenly take their profits in silver.
GFMS CEO Paul Walker suggested this week's interest rate hike decision by the U.S. Federal Reserve could also have fuelled part of gold's upward sprint.
"The U.S. interest rate decision two days ago could be interpreted, in my view, as a somewhat negative signal as to where the Fed sees the U.S. economy. They need to maintain the interest rate differential with other major currencies to keep the flow of funds into the U.S. That is a long-term negative signal for the dollar and where the U.S. economy is going," he said.
One of the constraints on the next phase for the gold price will be the flows of scrap gold onto the market and reduced physical demand from major gold consumption centres like India and the Middle East because of the high prices, he said.
However, fabrication demand will put a floor of $540-$550 under the gold price because demand will kick in if the precious metals hits these levels.
"We are still of the view that in the current market environment. with no other strong economic data to suggest otherwise, gold should be trading in the $540-$550 range," Walker said.
Free news alerts: click here to subscribe
"The fact that it is pushing higher may well be an indicator that the financial markets are sending signals to the investor group, which is taking a view it is a good time to get into gold."
GFMS expects the gold price to breach $600 in the second half of 2006, but Walker said with the way the price is behaving now it might just be a first half phenomenon.
--------------------------------------------------------------------------------
This article is a printout from Miningmx.com
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