Maple Leaf Steve
10-27-2005, 08:09 AM
Gold May Exceed Record $873
October 24, 2005
Bloomberg
Gold may top a record $873 an ounce during the next three years because the US will be unable to check inflation caused by rapid growth in China and India, said William Gary, a commodity broker and newsletter publisher.
The recent rally in gold, which reached a 17-year high of $483.10 on October 12, is different from the record rally in 1980 and more likely to sustain higher prices, said Gary, president of Commodity Information Systems Inc. Unlike the 1970s, global inflation currently is driven by Asia’s fast-growing economies, not just the US, he said.
``The US, by increasing interest rates and trying to curb inflation in the US, will not have the impact over the world as they did in the 1970s because we are a much smaller part of the world economy,’’ Gary said in an interview from Oklahoma City.
Some investors buy gold as an inflation hedge. When the US stopped backing the dollar with bullion in 1971, gold began its ``greatest bull market in history over the following nine years,’’ Gary said in his Price Perceptions newsletter on October 17. Subscribers include Tudor Investment Corp., a Greenwich, Connecticut-based hedge-fund operator that manages $9.4bn.
The fundamentals of this year’s gold rally make an even more compelling reason to be bullish on the precious metal than three decades ago, Gary said. Excess global liquidity ``holds the potential to push gold values to higher levels than occurred in the seventies,’’ he said.
Citigroup Inc., the world’s No. 1 bank, said in an October 14 report gold may average $470 next year. Deutsche Bank AG last month said gold may average $470 an ounce next year and $520 in ’07. Merrill Lynch & Co. in July predicted the metal would rise to $725 an ounce by ’10.
Three decades ago, the US was a creditor nation. Now, the country is a debtor nation owing $2.5 trillion, Gary said. The dollar fell 34% against the euro over the three years through ’04, helping to fuel a 57% rally in gold. ``The perception of value or worth in holding the dollar as a reserve asset is going to deteriorate in years to come,’’ he said. ``Gold will continue to gain acceptance as a reserve asset for both central banks and individuals rather than holding dollars.’’
Central banks, mainly in the US and Europe, hold almost a fifth of the world’s gold as a reserve asset. Gold has rallied from a 20-year low of $253.20 an ounce in 1999 partly because 15 central banks in Europe, including Germany, agreed to limit their annual bullion sales to 400 tonnes through ’04. The banks, under a second agreement that began last year, increased the annual limit to 500 tonnes.
The world’s central banks sold 478 metric tonnes of gold last year, or 23% less than in ’03, London-based precious metals researcher GFMS Ltd. said. ``Net selling of gold by central banks could turn into net buying in months and years ahead,’’ Gary said. Another difference is that countries now are printing more money to devalue their currencies to boost exports, Gary said. Japan sold a record 14.8 trillion yen ($144.2 bn) in the first three months of ’04 to slow currency’s gains against the dollar.
``Competitive devaluations have led to a tidal wave of liquidity this time,’’ Gary said. ``The benefactors of this tidal wave of liquidity are primarily Asian and Middle Eastern nations that have historically maintained a penchant for gold.’’
Jewellery fabrication demand rose 16%, or about 200 tonnes, in the first half of the year, according to a September 14 report by GFMS. India, the Middle East and China had the largest gain, it said. Hedge funds, which didn’t exist in the 1970s, may provide a big boost for gold in coming months, Gary said.
http://economictimes.indiatimes.com/articleshow/msid-1272263,curpg-1.cms
http://www.slate.com/id/2128196/
October 24, 2005
Bloomberg
Gold may top a record $873 an ounce during the next three years because the US will be unable to check inflation caused by rapid growth in China and India, said William Gary, a commodity broker and newsletter publisher.
The recent rally in gold, which reached a 17-year high of $483.10 on October 12, is different from the record rally in 1980 and more likely to sustain higher prices, said Gary, president of Commodity Information Systems Inc. Unlike the 1970s, global inflation currently is driven by Asia’s fast-growing economies, not just the US, he said.
``The US, by increasing interest rates and trying to curb inflation in the US, will not have the impact over the world as they did in the 1970s because we are a much smaller part of the world economy,’’ Gary said in an interview from Oklahoma City.
Some investors buy gold as an inflation hedge. When the US stopped backing the dollar with bullion in 1971, gold began its ``greatest bull market in history over the following nine years,’’ Gary said in his Price Perceptions newsletter on October 17. Subscribers include Tudor Investment Corp., a Greenwich, Connecticut-based hedge-fund operator that manages $9.4bn.
The fundamentals of this year’s gold rally make an even more compelling reason to be bullish on the precious metal than three decades ago, Gary said. Excess global liquidity ``holds the potential to push gold values to higher levels than occurred in the seventies,’’ he said.
Citigroup Inc., the world’s No. 1 bank, said in an October 14 report gold may average $470 next year. Deutsche Bank AG last month said gold may average $470 an ounce next year and $520 in ’07. Merrill Lynch & Co. in July predicted the metal would rise to $725 an ounce by ’10.
Three decades ago, the US was a creditor nation. Now, the country is a debtor nation owing $2.5 trillion, Gary said. The dollar fell 34% against the euro over the three years through ’04, helping to fuel a 57% rally in gold. ``The perception of value or worth in holding the dollar as a reserve asset is going to deteriorate in years to come,’’ he said. ``Gold will continue to gain acceptance as a reserve asset for both central banks and individuals rather than holding dollars.’’
Central banks, mainly in the US and Europe, hold almost a fifth of the world’s gold as a reserve asset. Gold has rallied from a 20-year low of $253.20 an ounce in 1999 partly because 15 central banks in Europe, including Germany, agreed to limit their annual bullion sales to 400 tonnes through ’04. The banks, under a second agreement that began last year, increased the annual limit to 500 tonnes.
The world’s central banks sold 478 metric tonnes of gold last year, or 23% less than in ’03, London-based precious metals researcher GFMS Ltd. said. ``Net selling of gold by central banks could turn into net buying in months and years ahead,’’ Gary said. Another difference is that countries now are printing more money to devalue their currencies to boost exports, Gary said. Japan sold a record 14.8 trillion yen ($144.2 bn) in the first three months of ’04 to slow currency’s gains against the dollar.
``Competitive devaluations have led to a tidal wave of liquidity this time,’’ Gary said. ``The benefactors of this tidal wave of liquidity are primarily Asian and Middle Eastern nations that have historically maintained a penchant for gold.’’
Jewellery fabrication demand rose 16%, or about 200 tonnes, in the first half of the year, according to a September 14 report by GFMS. India, the Middle East and China had the largest gain, it said. Hedge funds, which didn’t exist in the 1970s, may provide a big boost for gold in coming months, Gary said.
http://economictimes.indiatimes.com/articleshow/msid-1272263,curpg-1.cms
http://www.slate.com/id/2128196/