1. Analyst: Gold to Hit $850
Moneynews.com , April 12 2006
A number of factors could align to send gold as high as $850 per troy ounce, according to one analyst.
The current bull run on the precious metal is being fueled by investors' thirst for commodities "both for speculative purposes and as an alternative asset to equities, bonds and cash," says The Financial Times.
The newspaper cites Philip Klapwijk of precious-metals consultancy GFMS, who says, "Levels safely over $600 are now in our sights and further hefty gains over the next year or two are quite possible - in the right circumstances, the 1980 high of $850 could even be taken out."
Gold fever is being supported by expectations of a major slowdown in U.S. growth, Middle East tensions and global inflationary pressures.
But as demand soars, buyers have found that gold production has dwindled "because mining companies cut back capital investment during a 1990s price slump," according to an article in The Wall Street Journal.
"World gold production peaked at 2,621 metric tons in 2001 - just as the price was falling below $260. As prices finally rose, output actually fell. Last year, less than 2,500 tons was produced," says the Journal.
"The reason: Opening or expanding mines can take a decade of exploring, investing and seeking environmental approvals, and shell-shocked companies cut such spending heavily during the long price decline. Some were slow to invest again when prices started climbing."
A GMFS survey found that yearly mine production around the world rose only 2% in 2005, while production in South Africa was at its lowest level in 82 years as mines there could not afford to stay open in the face of exorbitant costs.
But experts expect the gold production situation to improve.
"While start-ups in 2006 will add to the bottom line, 2005's mines ramping up to full-rate production will be the source of further significant volumes," Bruce Alway, a senior analyst at GFMS, told the Times.
