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Gold seen heading for 500 ounce in 2005 Original Source Link: (May no longer be active)
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Gold seen heading for $500/ounce in 2005 - poll
LONDON, Nov 26 (Reuters) - Gold is destined to reach $500 an ounce in 2005 on expectations of further dollar weakness but may correct lower first, an informal poll of London analysts showed.
Seven of the nine analysts contacted by Reuters this week saw gold hitting $500 next year, with the majority looking for it to happen in the latter half of 2005.
Two were more bullish, predicting $500 in the first quarter of 2005, while two did not see it on the cards anytime soon.
Gold (XAU-) was quoted around $450 an ounce at 1245 GMT, having touched its highest in more than 16 years at $455 an ounce earlier on Friday.
Further dollar weakness, beyond $1.40 versus the euro (EUR-), would be needed to take gold above $500 for the first time since December 1987.
"The crucial factor is the strength of the U.S. dollar, nothing affects it more than that," said Paul Merrick, vice president commodities at RBC Capital Markets.
He expected gold to fall back towards the mid-$430's in the first quarter of 2005, before recovering to reach $500 in the second half -- assuming the U.S. government continued to do nothing much about its twin deficits.
Gold's value is up 77 percent from a near 20-year low in 2001, when it slumped under the weight of forward selling from producers and central banks liquidating their gold reserves.
ATTRACTIVE INVESTMENT
Over the past three years, a broader array of investors have poured money into commodities as the sector has outperformed more traditional asset classes like equities and bonds.
Kevin Crisp, analyst with Koch Metals Trading, said the market would need to steadily attract investment interest from an even wider audience to make $500.
"The worst thing is for it to become a one-night wonder where it shoots meteorically high and then just collapses."
Along with others, he was closely tracking the performance of a newly-launched gold exchange-trade fund (ETF) in New York.
"There seem to be some big dollar numbers going into this. Time will tell how successful it will be, but this market (New York) was the one it had to be launched into."
John Reade, precious metals analyst with UBS Investment Bank, saw gold at $500 towards the end of 2005, but said it was ripe for a correction now.
"This has all got a bit ahead of itself...you just don't see a straight line up like that lasting for ever."
Barclays Capital analyst Kamal Naqvi did not see gold making $500, mainly due to the fact that his bank's currency strategists expected the dollar to stabilise in 2005.
A TRUE BULL?
Bullion's performance in other currencies was less impressive. Analysts say a true bull market is when a commodity rises in all currencies.
Gold in euro terms (XAUEUR-R) remains well within a 3-1/2 year range and was trading on Friday at 340.60 euros, off Monday's seven-month peak above 344 euros.
Rhona O'Connell, managing director of GFMS Analytics consultancy, said she did not see gold above 400 euros, but added she would not be surprised if dollar-gold reached $500 before February/March next year.
Stephen Briggs, economist with SG Corporate and Investment Banking, said gold above 350 euros would indicate the metal was becoming a story in its own right.
"It has turned back on that level three or four times (in the past 3-1/2 years). It would be like saying: This is no longer 80 percent a dollar story, there's more to it than that."
A table containing individual forecasts follows:
Analyst Firm $500? When?
Stephen Briggs SGIB YES euro above $1.40
Kevin Crisp Koch Metals YES no comment
Paul Merrick RBC Capital Markets YES H2 2005
Kamal Naqvi Barclays Capital NO
Ross Norman TheBullionDesk.com YES Q1 2005
Rhona O'Connell GFMS Analytics YES Q1 2005
John Reade UBS Investment Bank YES Q4 2005
Matthew Turner Virtual Metals NO
Alan Williamson HSBC YES H2 2005
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11/26/2004 08:01
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