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Gold set for historic high, says US fund



Gold set for historic high, says US fund
David McKay
Posted: Wed, 07 Dec 2005

[miningmx.com] -- THE gold bull run would continue and possibly breach $900/oz based on history, said Jim Rogers, co-founder of the Quantum Fund with George Soros. Rogers was speaking on Classic Business, a week nightly business radio programme aired in South Africa.

Gold traded at a 24 month high in Asia moving to $512.72/oz, the highest since April 1981, Bloomberg News said. Gold has risen 17% this year, heading for a fifth straight annual climb, outperforming a 4.3% gain by the Standard & Poor's 500 Index, the news wire service said. Jewellery demand and signals of potential Central Bank gold purchases were supporting the metal, it said.

In every bull market, commodity and precious metal prices always record a higher spot price than in the previous cycle, Rogers said. On this basis, gold would have to push through its last historic high. “That means gold has to go to at least $900, and silver has to go much higher if history is any guide to how bull markets have always worked.”

Gold recorded a record high of $873/oz in intraday trade during January, 1980. It has however attempted similar rallies and not breached this level. It pushed through $500/oz in December 1987 while in early February, 1983, it managed a few attempts at $500/oz, peaking at $509/oz before falling to $340/oz by the end of that year.

Nonetheless, Rogers told Classic Business that under-exploration and weakness of the dollar would continue to underpin precious metal and commodity prices. Moreover, a special incentive for American companies to bring their money back to the US expires this year. “So you will see the dollar resume its decline,” Rogers said.

“The dollar is fundamentally flawed, and it’s going to be a serious problem in the next five or 10 years. However, that’s not the main reason commodities will be going up. The main reason is supply and demand are out of whack, but a weak currency like the dollar is going to help commodities.”

Rogers put his weight behind commodities in the midst of the dot.com bubble and produced a book, ‘Hot Commodities’ in 2004 claiming the world was entering a major bull run in resources. His Rogers International Commodities Index, which is a compendium of agricultural products, energy and minerals and metals, recorded monthly growth of between 184% to 234% to November this year.

If the outlook for gold was promising, there was even better news for commodities such as oil and base metals. This was again owing to under investment in the sector but also because demand would remain sharp.

“Most Chinese still don’t have electricity, most Indians still don’t have electricity. Demand will continue to grow,” he said.

The copper price was likely to correct in the short-term, but the recent declines in the oil price would be reversed. “Oil will be well over $100/barrel before it’s [the commodities bull run] over.

“If history is any guide this bull market is going to last until around 2018, sometime between 2014 and 2022, and everything is going to go much higher. There has been no major oil discovery anywhere in the world in over 35 years, every oil field you know is in decline,” he said.


LINK: http://www.miningmx.com/gold_silver/666464.htm