Gold price set to keep rising

The price of gold is set to remain high next year, putting it on track to break $US1000 an ounce for the first time, as it continues to offer investors a haven from volatile markets and supply remains tight.

This year, gold traded from a low of $US601.90 in January to a high of $US845.40 in November, as investors hedged against rising inflation and financial markets wobbled. Market watchers tip gold to rise a 28-year high of $US850 in the first quarter of 2008, and reach as high as $US1100 by December.

The chief executive of the world’s third-largest gold producer, AngloGold Ashanti, Mark Cutifani, is confident about ongoing strength of the gold price.

“You can take gold anywhere in the world and there will be a buyer, which can’t be said for many other commodities,” he said. He predicts gold to remain above $US800 next year on the back of heightened demand, “not taking into account factors such as the high oil price and instabilities in currencies”.

But while industrial development in China and India is putting upward pressure on commodity prices, the cost of producing gold is now more than $US700 an ounce, causing slimmer margins for producers.

Fat Prophets senior resources analyst Gavin Wendt agrees that gold supply will remain tight, with mine closures and fewer discoveries, and as the cost of mining gold becomes more expensive.

He said it was only a matter of time before the gold price moved up to the $US1000 mark.

“We’re going to see further weakness in the US dollar, which has to be positive for gold. We’ll see the continuation of strong oil prices and that inflationary effect will be positive for gold.”

In August, the vice-chairman of one of the world’s biggest gold miners, Newmont Mining Corp’s Pierre Lassonde, said the price of gold would break $US1000 within the medium term.

A well-known gold bull, Mr Lassonde’s predictions have already proved prescient, even if his time frames have been shortened by market events.

He correctly forecast gold to “attack” the $US750 level, which it did in October. He sees gold trading at more than $US850 early in 2008, particularly if the US economy slips into a recession.

Forecaster Argonaut Securities also expects the gold price to strengthen next year, with key support being driven by its role as a safe haven financial asset.

The World Gold Council says gold offers good protection against exchange rate fluctuations, particularly the US dollar.

It said there was little prospect of an increase in mine production in 2008, but demand would continue as investors tried to hedge against inflation and market volatility. Worsening geopolitical tensions could also add to the case for a higher gold price.

Commodity Broking Services managing director Jonathan Barratt said rising inflation in China would also make gold more attractive.

http://canberra.yourguide.com.au/news/local/business/gold-price-set-to-keep-rising/1153413.html

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