Gold Forecast to End 2010 at $2000
Commodities / Gold and Silver 2010 Dec 23, 2009 - 09:12 AM GMTBy: Adrian_Ash
THE PRICE OF WHOLESALE gold bullion recovered from a new 7-week low in Asian and London dealing on Wednesday, rising above $1080 an ounce as world stock markets extended their 3-day gains.
"Trading is uneventful with Tokyo out on holiday," said one dealer.
"Investor and physical interest in the Far East seems to be slowing down ahead of the year end," says another.
Crude oil crept back above $74.50 per barrel, meantime, more than twice the price of this time last year.
On the currency markets the US Dollar was flat early Wednesday, holding the British Pound and Japanese Yen at 8-week lows and the Euro – which most often moves in the same direction as Dollar-gold prices – near a 16-week low.
"It's quite possible we have seen the peak in gold," reckons Erik Davidson, managing director of private banking at Wells Fargo in the western United States.
"In 2010, I think things will go back to normal – i.e. a growing economy – and normal takes a bit of fear away from gold."
But "Annual mine production is declining and costs are going up, so that means higher gold prices," says Rob McEwen, CEO of North America's third largest gold miner, US Gold Corp.
"By the end of 2010 I see the gold price at $2000 and before the game's over at over $5000," he told Reuters on Tuesday.
Forecasting that the peak will "probably" come between 2012 and 2014, "Gold is only used as a currency in times of economic distress, and we're at one of those points," says McEwen – "one of three in the last 110 years."
Short term, "Technically gold has looked weak since reversing off 1226.50 on December 3rd," says today's note from Scotia Mocatta. "Long dark candle sticks overhang the price action, keeping our bias lower."
"I am looking at a [range of] $1050 to $1125 for the next couple of weeks", says George Gero at RBC Capital Markets.
"Longer term these large sell-offs represent buying opportunities but not in the short term."
Here in Europe on Wednesday, minutes from the latest Bank of England policy meeting showed all nine members of the executive voting to keep UK rates at the historical low of 0.5% and proceed with £200 billion ($320bn) of quantitative easing.
"Positive developments" in the economy were "relatively minor", the Monetary Policy Committee agreed, pointing to "uncertainties [in] the medium-term outlook."
UK government bonds ticked lower on Wednesday, pushing the yield offered by 10-year gilts up towards 4.0%.
German Bunds also fell, taking 10-year Euro yields up to 3.30%. US Treasuries were little changed.
The gold price in both Sterling and Euros bounced from 5-week lows at £675 and €756 an ounce respectively.
"If you start having serious problems credit wise with the likes of Spain, then the Euro's credibility and its pricing against other currencies becomes a much bigger issue," says Goldman Sachs chief economist Jim O'Neill, speaking to Bloomberg.
"Obviously the Euro appears to be already affected by this."
The Moody's rating agency yesterday joined Fitch and S&P in downgrading Greece's government bonds. Athens today adopted a "crisis budget" aimed at reducing its public deficit, running at 12.7% of annual GDP.
China's largest stock broker, Citic Securities, meantime raised its GDP forecast for the world's third largest economy, saying China could increase output by 12% in 2010 and risk a surge of inflation unless the People's Bank raises interest rates.
Chinese households this year overtook Indian consumers as the world's No.1 private gold buyers, spending the equivalent of 2.0% of income saved on gold investment and jewelry.
By Adrian Ash
BullionVault.com
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Formerly City correspondent for The Daily Reckoning in London and a regular contributor to MoneyWeek magazine, Adrian Ash is the editor of Gold News and head of research at www.BullionVault.com , giving you direct access to investment gold, vaulted in Zurich , on $3 spreads and 0.8% dealing fees.
(c) BullionVault 2009
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