Sunday, April 03, 2005 6:44:36 PM
*** Murenbeeld lowers PoG estimates ***
Hi Mark,
I know you think as highly of the good Dr as I think ill of Tim Wood, but news is newz regardless how it is spun......
Kindly note the smeared #'s in the Dundee PoG forcast below....
I guess they think they got it wired..... <vbg>
Murenbeeld Eases Back Gold Price Forecast on Dollar Doubt
By Tim Wood
01 Apr 2005 at 10:31 PM EST
NEW YORK (ResourceInvestor.com) -- It has been a tumultuous fortnight for investors who like gold. They have run into a ‘no-bid’ wall on equities lately and it’s come shortly after the metal price seemed ready to soar back toward $450 per ounce. Alas long positions were let go heavily last week and then a headwind of bad news hit the market leaving gold around its present levels which are not much different from one year ago.
There was at least a light rally this week despite the International Monetary Fund renewing a demand to mobilize the organization’s gold reserves to write-down the debt of highly indebted poor countries.
As Barclays Capital analysts have noted, the timing of the IMF call seems too coincidental not to be some sort of quid pro quo for endorsing Paul Wolfowitz as the new head of the World Bank.
That might be more than speculation with the latest news that the IMF is seeking to liquidate only a portion of its reserves, which Reuters reported on Thursday to be a targeted 13-16 million ounces of gold (404-497 tonnes). Furthermore, the Financial Times reported an IMF official saying an ‘off-market’ transaction that would revalue rather than sell its gold reserves was unlikely – it is pushing for an outright sale whether from the fund or by netting out current national central bank sales.
That has not shaken the market yet, and nor did news that the European Central Bank (ECB) sold 1.5 million ounces (47t) under the second gold sales agreement.
Clearly Europe is not buying the argument that diversifying into gold is a good idea. Similarly, it indicates that the ECB has achieved considerable independence from the Bundesbank and Banque de France. When monetary union was first seriously mooted almost two decades ago pundits thought it unlikely that they would ever release their gold, or dictate monetary policy over the EU.
At least the latest sales came through the market without causing the sort of disruption it might have in more recent years though it was hardly a large amount of gold. Unfortunately it is troubling that the IMF cannot find a way to do an off-market transfer rather than an outright sale. Many gold price bets are hanging on Asian national treasuries soaking up gold en masse in a portfolio diversification play; the chances for that are slim on the current outlook.
Dr Martin Murenbeeld, writing in his latest weekly update on gold, noted that the heart of the problem (at least from a gold long’s perspective) is that there is too much “official” support for the dollar, mostly from the Asian countries that are the last best hope for unabashed gold bugs.
“The bottom line is that there is far too much “official” support for the Dollar; were it left to the vagaries of the currency markets the Dollar would be much lower, and mostly now against the Asian currencies. And gold would be higher as a result,” he writes.
Murenbeeld’s latest gold price forecasts show steady increases through to a peak in the first quarter of 2006. That’s based on his favoured scenario though the probability weighted forecast shows gains right through to the third quarter of 2006 although the pace slows measurably a year from now.
The revisions to his forecasts are driven by uncertainty regarding the US dollar which he expects may trade higher again for a while. Murenbeeld reports increasing dollar bullishness to which he is aligning his forecasts to some extent.
As a result, the forecast prices are somewhat lower than the scenarios projected late in 2004. Then he expected the first quarter gold price to average $445/oz on his preferred scenario and $448/oz on a probability weighted basis. The actual average was $427/oz.
The net result as of this latest update indicates an average price for 2005 that is about $35/oz lower than originally expected, the dilution primarily a factor of dollar strength. “It is within our overall outlook that the Dollar trades sideways, or even higher, this year.”
It’s not necessarily detrimental to gold though since Murenbeeld notes that a higher dollar would play havoc with America’s trade and current account balances. The US current account deficit threatens to fall to $1 trillion by his estimates as a result of the US growing more strongly than its trader partners and even allowing for lower oil prices.
What is alarming is that despite the massive adjustment in currency values between the US and Europe (+50%) there has been no meaningful change in the trade deficit.
That likely goes to a much larger issue that also impacts inflation.
The markets went through an energy wobble in late 2000 and early 2001 that saw prices spike tremendously. However, prices cooled again and things seemed to be back to “normal”. That mentality seems to still be in play though it is wearing thin. Anecdotal evidence suggests European exporters have been absorbing losses in expectation of a “correction” back to previous levels. American producers also seem to have tried absorbing higher energy and commodity costs because they were anticipating a reversion to levels seen in the recent medium term.
Reality has arrived and economic data is showing higher prices pulsing through to consumers in the US. Likewise, Germany’s crippling unemployment, which is tightly correlated with the euro/dollar exchange rate, has reached intolerable levels. Intolerable because it is manifesting in things like polls showing a hankering for the resurrection of the Berlin Wall, and as Germany feels so intimidated by Poland (isn’t history full of irony) that it has adopted supply side measures such as lower corporate tax rates.
For now Murenbeeld notes that the US dollar benefits from: “. . .the globalization of capital flows benefits the Dollar because the US economy is simply that much more dynamic and profitable. Ergo, the US receives a disproportionate percentage of foreign capital, which then “allows” the US to run such outsized deficits. But this can only go so far!”
Unless the stresses are resolved, Murenbeeld continues to foresee risks of a sharp depreciation in the dollar versus the Asian currencies which are currently fighting that inevitability through their central banks maintaining demand for dollars.
http://www.resourceinvestor.com/pebble.asp?relid=8972
Hi Mark,
I know you think as highly of the good Dr as I think ill of Tim Wood, but news is newz regardless how it is spun......
Kindly note the smeared #'s in the Dundee PoG forcast below....
I guess they think they got it wired..... <vbg>
Murenbeeld Eases Back Gold Price Forecast on Dollar Doubt
By Tim Wood
01 Apr 2005 at 10:31 PM EST
NEW YORK (ResourceInvestor.com) -- It has been a tumultuous fortnight for investors who like gold. They have run into a ‘no-bid’ wall on equities lately and it’s come shortly after the metal price seemed ready to soar back toward $450 per ounce. Alas long positions were let go heavily last week and then a headwind of bad news hit the market leaving gold around its present levels which are not much different from one year ago.
There was at least a light rally this week despite the International Monetary Fund renewing a demand to mobilize the organization’s gold reserves to write-down the debt of highly indebted poor countries.
As Barclays Capital analysts have noted, the timing of the IMF call seems too coincidental not to be some sort of quid pro quo for endorsing Paul Wolfowitz as the new head of the World Bank.
That might be more than speculation with the latest news that the IMF is seeking to liquidate only a portion of its reserves, which Reuters reported on Thursday to be a targeted 13-16 million ounces of gold (404-497 tonnes). Furthermore, the Financial Times reported an IMF official saying an ‘off-market’ transaction that would revalue rather than sell its gold reserves was unlikely – it is pushing for an outright sale whether from the fund or by netting out current national central bank sales.
That has not shaken the market yet, and nor did news that the European Central Bank (ECB) sold 1.5 million ounces (47t) under the second gold sales agreement.
Clearly Europe is not buying the argument that diversifying into gold is a good idea. Similarly, it indicates that the ECB has achieved considerable independence from the Bundesbank and Banque de France. When monetary union was first seriously mooted almost two decades ago pundits thought it unlikely that they would ever release their gold, or dictate monetary policy over the EU.
At least the latest sales came through the market without causing the sort of disruption it might have in more recent years though it was hardly a large amount of gold. Unfortunately it is troubling that the IMF cannot find a way to do an off-market transfer rather than an outright sale. Many gold price bets are hanging on Asian national treasuries soaking up gold en masse in a portfolio diversification play; the chances for that are slim on the current outlook.
Dr Martin Murenbeeld, writing in his latest weekly update on gold, noted that the heart of the problem (at least from a gold long’s perspective) is that there is too much “official” support for the dollar, mostly from the Asian countries that are the last best hope for unabashed gold bugs.
“The bottom line is that there is far too much “official” support for the Dollar; were it left to the vagaries of the currency markets the Dollar would be much lower, and mostly now against the Asian currencies. And gold would be higher as a result,” he writes.
Murenbeeld’s latest gold price forecasts show steady increases through to a peak in the first quarter of 2006. That’s based on his favoured scenario though the probability weighted forecast shows gains right through to the third quarter of 2006 although the pace slows measurably a year from now.
The revisions to his forecasts are driven by uncertainty regarding the US dollar which he expects may trade higher again for a while. Murenbeeld reports increasing dollar bullishness to which he is aligning his forecasts to some extent.
As a result, the forecast prices are somewhat lower than the scenarios projected late in 2004. Then he expected the first quarter gold price to average $445/oz on his preferred scenario and $448/oz on a probability weighted basis. The actual average was $427/oz.
The net result as of this latest update indicates an average price for 2005 that is about $35/oz lower than originally expected, the dilution primarily a factor of dollar strength. “It is within our overall outlook that the Dollar trades sideways, or even higher, this year.”
It’s not necessarily detrimental to gold though since Murenbeeld notes that a higher dollar would play havoc with America’s trade and current account balances. The US current account deficit threatens to fall to $1 trillion by his estimates as a result of the US growing more strongly than its trader partners and even allowing for lower oil prices.
What is alarming is that despite the massive adjustment in currency values between the US and Europe (+50%) there has been no meaningful change in the trade deficit.
That likely goes to a much larger issue that also impacts inflation.
The markets went through an energy wobble in late 2000 and early 2001 that saw prices spike tremendously. However, prices cooled again and things seemed to be back to “normal”. That mentality seems to still be in play though it is wearing thin. Anecdotal evidence suggests European exporters have been absorbing losses in expectation of a “correction” back to previous levels. American producers also seem to have tried absorbing higher energy and commodity costs because they were anticipating a reversion to levels seen in the recent medium term.
Reality has arrived and economic data is showing higher prices pulsing through to consumers in the US. Likewise, Germany’s crippling unemployment, which is tightly correlated with the euro/dollar exchange rate, has reached intolerable levels. Intolerable because it is manifesting in things like polls showing a hankering for the resurrection of the Berlin Wall, and as Germany feels so intimidated by Poland (isn’t history full of irony) that it has adopted supply side measures such as lower corporate tax rates.
For now Murenbeeld notes that the US dollar benefits from: “. . .the globalization of capital flows benefits the Dollar because the US economy is simply that much more dynamic and profitable. Ergo, the US receives a disproportionate percentage of foreign capital, which then “allows” the US to run such outsized deficits. But this can only go so far!”
Unless the stresses are resolved, Murenbeeld continues to foresee risks of a sharp depreciation in the dollar versus the Asian currencies which are currently fighting that inevitability through their central banks maintaining demand for dollars.
http://www.resourceinvestor.com/pebble.asp?relid=8972
Dan 
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