Gold may hit USD 1,000: Analysts 15 Jan 2008, 1101
LONDON: The price of gold is hitting new record highs owing
to the troubled US economy and a cocktail of other supportive
factors, leading some analysts to predict 1,000 dollars per
ounce could happen soon.
In recent days the precious metal has blasted past 900 dollars
in a record-breaking run.
Unprecedented demand for jewellery production in China and
India, the weak US dollar, rising inflation due to high oil
prices and fraught geopolitical concerns have sparked demand
for precious metals -- particularly gold.
On the London Bullion Market on Monday, gold blazed a trail
as high as 914.30 dollars per ounce. On Friday, gold had broken
through 900 dollars for the first time during New York trade.
"Psychologically, 1,000 dollars per ounce now has to
be a target," said John Payne, portfolio manager of Hexam
Global Resources Absolute Return Fund.
"Gold looks very well supported. "I think the primary
driver is concern over the US economy and the weak dollar.
Food price inflation, geopolitical concerns and oil near 100
dollars per barrel are all drivers of the price," added
The weak US currency makes commodities priced in dollars
-- like gold and crude oil -- cheaper for buyers using stronger
currencies and therefore encourages demand.
Traders are also investing their cash in gold as they search
for shelter from concerns over the troubled United States
economy. In addition, the metal benefits from its safe-haven
status in times of geopolitical uncertainty.
Also, with oil prices trading above 90 dollars per barrel,
more investors are turning to gold as they seek to guard against
rising inflation -- sparked by the soaring cost of crude in
Meanwhile on Monday, the European single currency rocketed
as high as 1.4914 dollars on growing expectations the Federal
Reserve will cut interest rates this month by 50 basis points
to bolster the battered US economy, dealers said.
Nik Bienkowski, head of listings and research at ETF Securities,
agreed that gold prices were on track to score new record
"The US Treasury has indicated that it has a negative
view on the US (economy) and the markets are looking for a
50 basis point reduction in interest rates at the next Fed
"That would be negative for the dollar and therefore
positive for gold," he added.
However UBS analyst Robin Bhar sounded a cautious note. "We
are more concerned about the prospects for a sharp correction
in all the precious metals rather than for near-term gains,"
Gold, which is used in the dentistry and electronics sectors,
had smashed its 28 year-old record of 850 dollars an ounce
earlier this year.
In the first week of 2008, political unrest in Pakistan after
the murder of the country's opposition leader Benazir Bhutto
led to fresh interest in gold.
Gold's last great charge was in the 1970s -- a decade which
was marked by recession, the two stunning oil shocks of 1973
and 1979, rampant inflation and doubts about the outlook for
the US economy.
In recent years, gold has found favour on buoyant demand
across commodity markets that has been driven by the booming
Chinese and Indian economies.
But the real kick came in late 2007 as the prospect of slower
global growth and rising inflation raised the spectre of "stagflation"
-- the bugbear of the 1970s -- coupled with a fearsome credit
crunch sparked by the collapse of the US subprime home loan