TORONTO (miningweekly.com) – The gold price is expected to continue to trade with a high level of volatility in the next six months, and could top the psychologically four-digit market for “extended” periods of time, Australian equity researcher Resource Capital Research (RCR) suggested in a report this week.
“The surging investment demand for gold as a ‘safe haven’ investment is unlikely to abate this year,” said RCR senior gold analyst Tony Parry.
“Even if it is considered ‘safe to go back into the water’ with equities, current stimulus spending, money printing and corporate rescues, and the resultant record budget deficits, particularly for the US economy, will produce the ‘X Factor’ that all gold bulls thrive on – fears of a re-emergence of strong inflation and a collapse in confidence in the US dollar,” he continued.
In its latest quarterly report on junior and midtier gold companies, RCR predicts that gold will trade between $900/oz and $1 050/oz in the next six months.
“Continued investment demand flowing from safe haven buying coupled with concern over longer term inflationary trends, and recent signs of US dollar weakness as the US economy heads for a record-breaking 2009 deficit, should see gold break through the $1 000/oz barrier during that period and be sustained above that level for extended periods.”
The spot price of gold was around $934/oz on Thursday afternoon, compared with a price of $879,45/oz at the start of 2009.
RCR noted prices have experienced “considerable volatility” in the last two months, falling to $898/oz on March 10 before rising to $954/oz after recent announcements from the US Federal Reserve, “confirming major bond purchases with ‘printed money’”.
Although jewellery and industrial fabrication demand for gold was relatively weak in 2008, falling 10% from 2007 levels, the price was buoyed by strong investment demand, as well as bar and coin hoarding in the second half of the year, and particularly in the first two months of 2009, RCR said.
Bar and coin demand rose 43% from 2007 to 2008, while exchange-traded funds have recently experienced record monthly inflows.
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