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Resource fund ‘loves' gold and platinum market ‘fantastic' - JP Morgan
JP Morgan Global Natural Resources Fund manager Ian Henderson says he expects gold to scale new peaks and that platinum demand doubts overdone.

Author: Jan Harvey and Anna Stablum
Posted: Wednesday , 27 Aug 2008

LONDON (Reuters) -

Gold prices are likely to scale new peaks as market fundamentals tighten because producers need at least a 20 percent rise in bullion prices just to make new investment viable, a leading fund manager said on Wednesday.

"Gold mining is a very complicated and expensive business and you really need to see the gold price a lot higher before you see any increase in gold production," Ian Henderson, who manages around $5 billion at JP Morgan's Global Natural Resources fund, told Reuters.

"(Gold) should have a sustained price level of over $1,200 an ounce before we see any significant new mine build," he said.

His concerns over miners' margins echoed those of Gold Fields chief executive Nick Holland, who told Mining Weekly the company would need to see a gold price of $2,000 an ounce to replace its infrastructure.

"We love gold. We have a substantial part of our portfolio in gold mining companies," added Henderson. "I think the gold price will surpass its previous peak."

Gold prices hit a high of $1,030.80 an ounce in March.

The platinum market was also looking "fantastic", Henderson said. Prices have slipped by more than a third since they struck a record high of $2,290 an ounce in March, leading a number of analysts to suggest the precious metal may have been oversold.

"The platinum market is going to be in deficit until probably 2010 -- and that means prices will continue to be high," said Henderson.

Fears over the outlook for the automotive sector, which consumes around a third of the world's platinum each year for use in catalytic converters, may have been overstated, he said.

"The changes in emission legislation for buses and commercial vehicles within Europe is going to be rolled out across the planet," he said.

Meanwhile global production, which is expected to be curbed this year by an ongoing power shortage in major producer South Africa, is expected to remain under pressure.

Power shortages in the country, which produces four out of every five ounces of the world's platinum, will not be resolved until 2012, he said.

(Editing by Christopher Johnson)

http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=60833&sn=Detail