GFMS' Walker looking for $1,000 gold soon
Paul Walker, CEO of metals analysis specialists GFMS reckons that gold
will surge through $1,000 again and stay strong for 12 to 18 months but may
then fade.
29 September 2008
KYOTO, JAPAN (REUTERS)
Gold should surge above $1,000 an ounce as the financial crisis fuels
safe-haven fund buying, but may then come under pressure as fickle investors
slow purchases, the chief of metals consultants GFMS said on Sunday.
"In terms of core trading range for us, I have to say that gold going up
towards the $1,000-level is not an impossibility at all," Paul Walker, CEO
of GFMS, told Reuters in an interview.
"I would be surprised given the scale of the economic crisis if gold doesn't
scale above $1,000," he said ahead of the London Bullion Market Association
annual conference in the ancient Japanese capital of Kyoto.
GFMS predicted on September 17 that prices would soar well above $900 an
ounce in the fourth quarter as the U.S. dollar weakened and investors
scrutinised the U.S. government's creditworthiness.
Later that same day prices staged their biggest ever one-day rally in real
terms, soaring from around $775 to end just shy of $863 an ounce. They
jumped again on September 18, briefly topping $900 before falling amid
unprecedented volatility.
Walker said gold will be averaging above $900 in the next 12 months, but in
a trading range, it could rise beyond $1,000, testing its record $1,030.80
an ounce peak from March 17.
"I think the depth of this crisis suggest to me gold prices will be at
elevated levels for probably for another 12 months or 18 months," Walker
said.
After a week of debate that roiled financial markets and put traders on
tenterhooks, U.S. lawmakers on Sunday were set to sign off on a deal to
create a $700 billion government fund to buy bad debt from ailing banks in a
bid to stem a credit crisis threatening the global economy.
Investors often use gold as a hedge against financial turmoil and a
weakening dollar. A falling U.S. currency also makes metals priced in
dollars cheaper for holders of other currencies.
But bullion has also been punished at times as part of the riskier
commodities pool that had been in investors' favour until this summer, and
its long-term outlook remains largely dependent on continued demand from
investors.
"There is short- to medium-term upside potential, but there is also an
increasing downside risk for gold prices in the long term," he said.
"The gold price could only be sustained where it is at the moment on the
back of investment demand for gold. And investment demand for gold is ...
very fickle or very temperamental."
Downside risks for gold are limited because of demand for physical gold for
jewellery, bars and coins in markets including the Middle East and India, as
well as other parts of Asia.
Walker said he was surprised when spot gold dipped below $800 per ounce, but
that will be the floor for the metal in the next three to six months.
© Reuters 2008. All Rights Reserved
From www.mineweb.co.za