Gold may hit USD 1,000: Analysts 15 Jan 2008, 1101
hrs IST,AFP
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 Payne.
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 many countries.
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 highs.
"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 meeting.
"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," Bhar said.
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 market.