Heres some more DD about gold if your interested.....
RBC Capital Markets believes the gold price will reach $1000/ounce or "perhaps significantly higher" later this year and into 2009 as inflation will rise in Asia and the Middle East and the US dollar will remain weak in a Fed rate cutting cycle.
The bank's equity research division said in a recent research note it maintained its longer-term bullish outlook for gold as it believed increased inflation expectations were not priced into the commodity.
We expect investment and macro fund buying to push gold through the $1000/ounce level over the next few months," said RBC.
However, the bank highlighted the risk that without any follow-on physical demand for gold, particularly out of India, the Far East and the Middle East - accounting for 70% of annual physical demand for gold - significant physical selling could occur.
Significant physical selling was observed in 2006 when the gold price spiked to $735/ounce and then sold-off to $550/ounce.
RBC believed a similar correction could see the gold price retrace back to the mid-$800/ounce level during the summer months with seasonally weaker demand.
Potential IMF Gold Sales and the Price
RBC believed any IMF gold sales were likely to occur in an "orderly fashion" and possibly as part of the current European Central Bank (ECB) gold sales programme of 500t/year.
The International Monetary Fund (IMF) currently holds 3,200 tonnes of gold and is the third largest holder of bullion, after the US (8,100t) and German (3,400t). The IMF needs approval from the US Congress to sell any of its gold, as currently being considered by the US Treasury, but this approval could take months in the current election year.
RBC could envisage IMF bullion sales replacing Swiss central bank sales within the current ECB gold sales programme. Switzerland completed its initial programme of selling 1,170t in 2004 and has only sold gold on a spot basis since then.
The bank believed that given current strong institutional and retail investment demand for gold, the bullion market could absorb any IMF gold sales within the context of the current ECB gold sales programme.
"Then in two years' time, when the current gold sales agreement expires, we believe the bullion market could absorb ECB gold sales of up to 700t/yr without a "serious negative impact" on a $850/ to $950/ounce price trading range. "
Two hundred tonnes represented an estimated 5% increase in global supply (from a 3,800t/yr market) when annual global physical and investment demand for gold has been growing and mine supply is expected to continue to contract.
Silver tracks along with gold
RBC believes the silver price will track the price of gold, breaking the $20/ounce level with a "push by gold through $1000/ounce".
Its fundamental view on silver remained bullish for the next few years, until new mine supply from primary silver mines and from other new gold and base metal mines came online.
