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Gold to hold above 400 this year and next { July 19 2004 } Original Source Link: (May no longer be active)
http://www.reuters.co.uk/newsPackageArticle.jhtml?type=businessNews&storyID=549651§ion=financehttp://www.reuters.co.uk/newsPackageArticle.jhtml?type=businessNews&storyID=549651§ion=finance
Gold to hold above $400 this year and next
Mon 19 July, 2004 13:24
LONDON (Reuters) - Gold prices are seen holding an average above $400 an ounce for the foreseeable future as the dollar stays weak and world security worries keep big investors hedging their bets on where money is safe, a Reuters poll shows.
The global survey of 24 analysts pointed to an average gold price of $404.50 a troy ounce in 2004, up 11.2 percent on 2003. Gains were then seen being pared to an average for 2005 of $402.50, up 10.6 percent on the 2003 level of $363.83.
Analysts' predictions for 2004 were down around 3.5 percent compared with a similar survey conducted in January as expectations of broader investment flows had disappointed.
"2004 promised so much and simply failed to deliver," Ross Norman of TheBullionDesk.com said.
Gold's broad uptrend started in 2001, when the metal was near 20-year lows.
The advance gathered momentum as dollar weakness, global security worries and producer buy-backs of reserves in the ground that they had sold on forward markets pushed world prices to a 15-year peak in early January 2004 of $430.50.
Producer buy-backs have since slowed, but the market should remain firm as the spotlight concentrates on the dollar, where weakness makes gold less expensive for holders of other currencies.
"We are dollar bears, despite the fact that the second quarter of 2004 saw the dollar improve...We remain bullish on the gold price -- tempered to be sure," economist Martin Murenbeeld said.
"Issues such as debt -- government and household -- factor into our longer-term thinking and are gold-positive, while terrorism and its potential impact on oil prices are on average also gold-positive," he added.
BROADER INVESTMENT STALLS
Investment funds piled into commodities, including gold, in 2003 against the backdrop of a struggling dollar and heightened geopolitical tension.
But analysts said the market had been only partially successful in its efforts to attract new investors with products such as gold-backed securities traded on stock exchanges.
"The expectation of a sustained rally was based on the assumption that a retail and wholesale investment market would be launched and indeed gather momentum," TheBullionDesk's Norman said.
"The market has failed to inspire the investment community and so the indomitable laws of supply/demand are re-asserting themselves and gold is re-establishing itself in a rather uninspiring trading range."
Average 2004 price forecasts for gold in the poll range from $376.00 to $422.25, but even the low was above the average forecast for 2004 of $350 when a similar poll was conducted in July 2003.
Frederic Panizzutti of MKS Finance said economists' expectations of a slow but almost confirmed world economic growth cycle -- plus moderate, but increasing inflation -- should be positive for commodities prices.
"Geopolitical instability and concerns will be another source of support, in particular for precious metals," he added.
"These few but major factors should enable demand for precious metals to grow over time and generate additional price strength mainly in the last quarter of 2004," he said.
Silver was expected to be the top performing precious metal in 2004, with forecasts for an average price of $6.31 an ounce, up almost 30 percent from 2003. It was seen at an average $6.10 in 2005.
Analysts said silver was also prone to highly volatile moves given the level of speculative activity in a market where fundamentals were weak.
PLATINUM, PALLADIUM FIRM
Strong fundamentals were expected to keep platinum prices firm in 2004, but the market was not seen revisiting the 24-year peak seen in April at $942.00, while palladium might be capped by its dependence on speculators.
Platinum supply shortfalls might ease, but speculation about the possible use of palladium as a substitute for platinum in catalysts for diesel-powered cars was seen as premature.
"Platinum remains the metal with the strongest fundamental background. Nevertheless we consider it will get closer to a balanced market. Since industrial consumers already purchased during the recent corrections they are not forced to buy at any price," Dresdner Kleinwort Wasserstein said.
Analysts forecast an average platinum price in 2004 of $834.00 an ounce, up more than 20 percent on 2003, before a drop to an average $805.00 in 2005.
Palladium -- which briefly rose to $300 an ounce earlier this year on fund buying fuelled by news of new technology to boost its use in the auto sector -- was seen rising 20.9 percent to an average $240.00 in 2004 and then rising further to $250.00 in 2005.
"Though fundamentals have brightened up to some extent after news came out that palladium can be used in catalysts for diesel engines, the picture remains mixed. In our eyes, the upside is therefore limited," Dresdner said.
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