You are here
The next China may be India, and they sure like gold over there
By James Attwood
Dow Jones Newswires
Sunday, May 8, 2005
http://sg.biz.yahoo.com/050508/15/3sel0.html
SYDNEY, Australia -- With the pendulum apparently swinging back in
gold's favor, some analysts now expect the metal is back on track
for US$500 some time next year.
Confidence is building among gold traders and analysts that the
widening U.S. twin deficits will keep the U.S. dollar under pressure
for at least another year or two, setting the scene for gold to
resume its upward trend.
Prices have climbed steadily since early 2001 as investors have
sought refuge from a weakening greenback. Gold peaked late last year
just below US$460 an ounce and has since returned to US$430 levels,
in line with its inverted correlation with the U.S. dollar.
"The U.S. dollar looks like resuming its downtrend after this rally
runs out of puff, which is positive for gold," says Euan Leckie,
portfolio manager of the US$420 million Scudder Gold & Precious
Metals Fund.
Gold bulls like Leckie expect the metal to hit US$475 by the end of
2005 and reach US$500 next year in a continuation of a slow upward
trend.
"If we don't see prices above US$500 within 18 months we'd be more
than a little surprised," he told Dow Jones Newswires in an
interview.
Ellison Chu, senior trader with Standard Bank London in Hong Kong,
said gold is likely to stay in the US$425-US$438 range over the
medium term to finish 2005 around US$450-US460.
"I'm a bit bullish on gold because I don't think the dollar can be
as strong in the second half, not just because of the deficits but
because I don't think the foundation of the U.S. economy is as
strong as people think," said Chu.
In New York, Comex June gold fell US$3.80 to settle at US$426.90 on
Friday, off a three-week low of US$424.50 on aggressive commodity
fund selling.
Sydney-based investment advisory group Fat Prophets this month said
it believes gold is in the early stage of a bull market.
"While gold remains vulnerable to additional selling pressure in the
near term, we believe the longer term outlook remains overwhelmingly
positive," Fat Prophets said in a note to clients.
"The fundamental backdrop for the precious metal has seldom been
this supportive in our opinion. In time, we believe the price of
gold will surpass the 1980 all-time high of US$850 an ounce," it
said.
While gold and other precious metals continue to take their cues
primarily from the U.S. dollar, market participants point to a list
of other supporting factors.
Gold is more a de-facto currency than a commodity, thereby largely
shielding it from the anticipated slowdown in global economic
growth, which has most base metals, for instance, on the back foot.
It is also seen as an inflation fighter and therefore stands to
benefit from any stagflation scenario, says Leckie from Scudder
Gold, who sees a possible revaluation of China's currency as
potentially inflationary and therefore positive for gold.
Besides U.S. dollar strength, gold's traditional enemy is
uncontrolled central bank selling, which at one point took prices
down to US$250 an ounce.
But Leckie said central banks have learned their lesson and the 1999
Washington Accord affords protection from future gold dishoarding.
Another potential threat -- the proposal for the International
Monetary Fund to sell some of its gold reserves to write off debt
owed by poor countries -- now looks unlikely to materialize with the
U.S. indicating it would veto the move.
"The proposal is a concern because you have (U.K. Chancellor of the
Exchequer) Gordon Brown trying to make a name for himself amongst
the electorate as well as amongst people in less developed
countries," said Leckie.
"But we'd expect any possible sale by the IMF, should the U.S.
eventually approve, to go through the Washington Accord. ... It
wouldn't be an increase in annual supply of gold, rather an increase
in the life of the accord," he said.
And as European central banks continue their measured selling of
surplus reserves, there is very real scope for Asian countries,
particularly China and Japan, to start buying gold as a way to
diversify foreign reserves, Leckie said.
"We can see that at any point in time China could easily use up some
of its big dollar reserves to buy gold," he said.
Analysts also point to favorable physical conditions for gold, with
mine production low, producers committed to continue reducing their
hedge positions under pressure from investors, and strong jewelry
demand from normally price-sensitive India.
The emergence of commodities of an asset class is also viewed as
supportive, as is continuing geopolitical volatility and global
financial imbalances.
"If we see the situation where, amid rising financial risks, people
go back to automatically including gold in their portfolios, then
that's going to require significant new demand for gold," said
Leckie.
----------------------------------------------------
To subscribe to GATA's dispatches, send an e-mail to:
gata-subscribe@yahoogroups.com
To unsubscribe, send an e-mail to:
gata-unsubscribe@yahoogroups.com
----------------------------------------------------
RECOMMENDED INTERNET SITES
FOR DAILY MONITORING OF GOLD
AND PRECIOUS METALS
NEWS AND ANALYSIS
Free sites:
http://www.cbs.marketwatch.com
http://www.usagold.com/amk/usagoldmarketupdate.html
http://www.capitalupdates.com/
http://www.silver-investor.com
http://www.thebulliondesk.com/
http://www.goldismoney.info/index.html
http://www.minersmanual.com/minernews.html
http://www.a1-guide-to-gold-investments.com/euro-vs-dollar.html
http://www.investmentrarities.com
http://www.kereport.com
(Korelin Business Report -- audio)
http://www.plata.com.mx/plata/home.htm
(In Spanish)
http://www.plata.com.mx/plata/plata/english.htm
(In English)
http://www.resourceinvestor.com
Subscription sites:
http://www.lemetropolecafe.com/
http://www.interventionalanalysis.com
http://www.investmentindicators.com/
Eagle Ranch discussion site:
http://os2eagle.net/checksum.htm
Ted Butler silver commentary archive:
http://www.investmentrarities.com/
----------------------------------------------------
COIN AND PRECIOUS METALS DEALERS
WHO HAVE SUPPORTED GATA
AND BEEN RECOMMENDED
BY OUR MEMBERS
Blanchard & Co. Inc.
909 Poydras St., Suite 1900
New Orleans, Louisiana 70112
888-413-4653
http://www.blanchardonline.com
Centennial Precious Metals
3033 East First Ave., Suite 807
Denver, Colorado 80206
1-800-869-5115
http://www.USAGOLD.com
Michael Kosares, Proprietor
cpm@usagold.com
Colorado Gold
222 South 5th St.
Montrose, Colorado 81401
http://www.ColoradoGold.com
Don Stott, Proprietor
1-888-786-8822
Gold@gwe.net
El Dorado Discount Gold
Box 11296
Glendale, Arizona 85316
http://www.eldoradogold.net
Harvey Gordin, President
Office: 623-434-3322
Mobile: 602-228-8203
harvey@eldoradogold.net
Gold & Silver Investments Ltd.
Mespil House
37 Adelaide Rd
Dublin 2
Ireland
+353 1 2315260/6
Fax: +353 1 2315202
http://www.goldinvestments.org
info@gold.ie
Investment Rarities Inc.
7850 Metro Parkway
Minneapolis, Minnesota 55425
http://www.gloomdoom.com
Greg Westgaard, Sales Manager
1-800-328-1860, Ext. 8889
gwestgaard@investmentrarities.com
Kitco
178 West Service Road
Champlain, N.Y. 12919
Toll Free:1-877-775-4826
Fax: 518-298-3457
and
620 Cathcart, Suite 900
Montreal, Quebec H3B 1M1
Canada
Toll-free:1-800-363-7053
Fax: 514-875-6484
http://www.kitco.com
Lee Certified Coins
P.O. Box 1045
454 Daniel Webster Highway
Merrimack, New Hampshire 03054
http://www.certifiedcoins.com
Ed Lee, Proprietor
1-800-835-6000
leecoins@aol.com
Lone Star Silver Exchange
1702 S. Highway 121
Suite 607-111
Lewisville, Texas 75067
214-632-8869
http://www.discountsilverclub.com
Miles Franklin Ltd.
3015 Ottawa Ave. South
St. Louis Park, Minn. 55416
1-800-822-8080 / 952-929-1129
fax: 952-925-0143
http://www.milesfranklin.com
Contacts: David Schectman,
Andy Schectman, and Bob Sichel
Missouri Coin Co.
11742 Manchester Road
St. Louis, MO 63131-4614
info@mocoin.com
314-965-9797
1-800-280-9797
http://www.mocoin.com
Resource Consultants Inc.
6139 South Rural Road
Suite 103
Tempe, Arizona 85283-2929
Pat Gorman, Proprietor
1-800-494-4149, 480-820-5877
Metalguys@aol.com
Swiss America Trading Corp.
15018 North Tatum Blvd.
Phoenix, Arizona 85032
http://www.swissamerica.com
Dr. Fred I. Goldstein, Senior Broker
1-800-BUY-COIN
FiGoldstein@swissamerica.com
The Moneychanger
Box 178
Westpoint, Tennessee 38486
http://www.the-moneychanger.com
Franklin Sanders
1-888-218-9226, 931-766-6066
----------------------------------------------------
HOW TO HELP GATA
If you benefit from GATA's dispatches, please
consider making a financial contribution to
GATA. We welcome contributions as follows.
By check:
Gold Anti-Trust Action Committee Inc.
c/o Chris Powell, Secretary/Treasurer
7 Villa Louisa Road
Manchester, CT 06043-7541
USA
By credit card (MasterCard, Visa, and
Discover) over the Internet:
http://www.gata.org/creditcard.html
By GoldMoney:
http://www.GoldMoney.com
Gold Anti-Trust Action Committee Inc.
Holding number 50-08-58-L
Donors of $1,000 or more will, upon request,
be sent a print of Alain Despert's colorful
painting symbolizing our cause, titled GATA.
Donors of $200 or more will receive copies
of "The ABCs of Gold Investing" by Michael
Kosares, proprietor of Centennial Precious
Metals in Denver, Colorado, and "The Coming
Collapse of the Dollar" by James Turk and
John Rubino.
GATA is a civil rights and educational
organization under the U.S. Internal Revenue
Code and contributions to it are tax-deductible
in the United States.
