Gold tracks euro higher

Singapore - Gold edged up to track a firmer euro and crude oil on Wednesday, but trade was thin, with investors careful about taking large positions ahead of a European interest rate cut that could sap the single currency.

Investors expect the European Central Bank to slash interest rates on Thursday by 50 basis points from 2.5% now, to help fight the economic downturn.

Gold was at $824.40 an ounce, up $3.35 from New York's notional close on Tuesday, when it dropped to a 1-month low of $813.10 before bouncing back to track gains on crude oil.

"I think everyone is cautious ahead of the ECB meeting. The correlations are a bit mixed recently. I mean, the dollar was up against the euro yesterday but we also saw some strength in gold," said a dealer in Singapore.

The euro bounced from its weakest in a month against the dollar but was still under pressure ahead of the ECB meeting. The euro firmed to $1.3264 after hitting a one-month low of $1.3140 on trading platform EBS.

In theory, a weaker dollar lifts gold's appeal as an alternative investment as the world tilts into recession. But commodity prices, quoted in dollars, often suffer when the dollar is strong, as it weakens the buying power of investors using other currencies.

Oil rose more than $1 a barrel, aided by cold weather in the United States and an announcement of further production cuts from Saudi Arabia.

Oil was likely to dictate movements in gold in coming days, but dealers also expected physical buying to offer support if the energy market reversed course again. Dealers noted buying on dips ahead of the Lunar New Year later in January.

"Demand gradually becomes very strong in Asia. $800 is the bottom price for the time being," said Yukuji Sonoda, precious metals analyst at Daiichi Commodities in Tokyo, referring to a level seen late in November.

Gold's recent falls also attracted buying from jewellers in Japan, while platinum, which has lost more than half of its value since hitting a record above $2 200 last March, also enjoyed steady demand, said Sonoda.

"The price has decreased so much. The economic situation is so bad but jewellery demand is stable," said Sonoda.

Gold was around 7% below an 11-week high of $889.55 hit in late December but has bounced more than 20 percent since falling to a 13-month low around $680 in late October.

Bullion hit an all time high of $1 030.80 an ounce last March.

Platinum was trading at $954.50 an ounce, up $13.50 from New York notional close. New York gold futures added $4.3 an ounce to $825.0 in electronic trade.

- Reuters

-www.news24.com

Gold headed for good 2009 as "perfect insurance" sought

The metal will average $910 an ounce in 2009, according to the median forecast of 20 analysts.

Nicholas Larkin, Claudia Carpenter and Pham-Duy Nguyen
07 January 2009 07:31

(Bloomberg) - Gold, the best-performing metal in 2008, may appreciate for an eighth year as investors seek a refuge from declining interest rates at the same time that central banks inject more cash into the banking system.

The metal will average $910 an ounce in 2009, 4.3 percent more than last year, according to the median forecast of 20 analysts, traders and investors surveyed by Bloomberg. Silver and platinum, which averaged at least 12 percent more in 2008, will decline this year, the survey showed.

Gold prices may strengthen after about $29 trillion was wiped off equities last year, the Federal Reserve cut interest rates to as low as zero and governments sought to end the worst financial crisis since World War II. The metal was one of only four commodities to rise when the Reuters/Jefferies CRB Index fell 36 percent, the worst year in a half-century.

"People fear inflation, they fear the credit crunch and they fear currency losses, and gold is the perfect insurance against all of that," said Frederic Panizzutti, a senior vice president at Geneva-based bullion refiner MKS Finance SA, who forecasts gold will average more than $900 in the first half of 2009. Panizzutti was the most accurate forecaster in the London Bullion Market Association's 2008 survey.

Average gold prices have risen for seven consecutive years, the longest winning streak since at least 1949. While the return of 5.8 percent through 2008 was the smallest since 2004 in dollar terms, gold rose 11 percent in euros and 44 percent in British pounds, data on Bloomberg show.

Mali Mines
The plunge in equities spurred some investors to buy precious metals. Gold in the SPDR Gold Trust, the largest exchange-traded fund backed by bullion, reached 780.23 metric tons on Dec. 29, up from 627.88 tons at the start of the year.

The total is equal to almost four months of supply from mines.

Gold producers were among the top performers in the 162- member Bloomberg World Mining Index last year, which fell 61 percent. Royal Gold Inc., the Denver-based owner of rights to gold sales from companies including Barrick Gold Corp., rose 61 percent. Randgold Resources Ltd., the Jersey, Channel Islands- based owner of two gold mines in Mali, advanced 60 percent.

"There is every reason to believe gold's going higher and a lot sooner than most people think," said Randgold Chief Executive Officer Mark Bristow, head of last year's best performing company in the FTSE 100 index, which it joined last month. "Our estimate is that new gold supply is going to be reduced by 15 percent over the next three years."

-www.moneyweb.co.za

full article here

Paul Walker calls gold to $1,100

Brendan Ryan
Posted: Thu, 08 Jan 2009

[miningmx.com] -- GFMS CEO Paul Walker predicts gold could rise to about $1,100/ounce by the end of 2009 with an “outside chance” of the metal reaching $1,200/oz during the year.

The UK-based precious metals analyst has turned more bullish on gold’s prospects following the financial crisis that erupted from September onwards and the steps taken by US and other government authorities to deal with it. Walker has been “on the money” with his predictions for both gold and platinum during 2008. In December 2007 he stated his belief that gold would not reach $1,200/oz by the end of 2008 and, in April last year, he turned negative on prospects for the platinum price contrary to conventional platinum industry wisdom at the time. Walker said: “Gold is looking a very attractive proposition for those people looking for a safe place to put their cash. “You have to look at the huge fiscal stimulus packages already put in place by the United States authorities and with more being promised once president-elect Obama gets into office. “These involve the creation of enormous amounts of debt by the government. There is no free lunch here. When it comes to repayment of the debts, government will have the choice of raising taxes or allowing inflation to run.

“It is much easier to take the pain of rising inflation than it is to take the pain of higher taxes.” Inflation is traditionally good for gold but some economists, in particular “Dr Doom” - New York University economics professor Nouriel Roubini, who predicted the financial crisis a year advance - believe the economic outlook is one of severe deflation. Deflation is bad for gold but Walker does not accept the deflationary economic outlook. He said: “I just don’t see deflation being a real issue in this market. You may see inflation rates coming off from their 2008 peak levels in the short term, but the more important issue concerns the situation where you have highly negative real interest rates. “I believe the current flight to the US dollar could reverse and the dollar could weaken significantly.” Walker’s views on inflation are supported by former Gold Fields CEO Ian Cockerill, the executive with whom Walker took a bet against the gold price reaching US$1,200/oz during 2008. Cockerill is now CEO of Anglo Coal but he still clearly follows the gold market closely. He said: “The inflationary pressures that must result from all these financial bail-outs must lead to higher inflation rates, which must lead to a higher gold price. I am surprised that gold has not yet performed as a result.”
-miningmx.com

JSE takes a dive

Johannesburg - The JSE had sunk into the red by noon on Wednesday as investors around the world took profits and markets consolidated after the recent big moves.

By noon, the JSE all share index had given up 0.84% with resources losing 0.82% and platinum counters falling 0.53%. However, gold miners collected 3.87%. Banks weakened 0.72%, financials were flat (down 0.08%) and industrials lost 1.21%.

The rand was last bid at R9.34 to the dollar, from R9.31 when the JSE closed on Tuesday, while gold was last quoted at $863.87 a troy ounce from $848.65/oz at the JSE's last close.

Platinum was at $986.50/oz from its previous close of $964.50/oz.

"It's really not surprising that we are down at the moment. We have had some very big moves," an equities trader said.

"Shares have been over done in the short term. There is profit-taking and markets are consolidating.

"Metals have moved a long way and we could see them come off a bit more," he said.

"The worldwide rally seems to have run out of steam. Dow futures are down at the moment and it wouldn't be surprising if we close lower as well," he added.

Dow Jones Newswires reports that London stocks moved lower as investors consolidated gains from the recent run.

The FTSE was last down 1.32%.

US stocks are expected to fall at the open, caught in the downward momentum of lower trading in Europe. Martin Slaney, trader at GFT Global Markets, calls the DJIA to open down 86 points and the S&P 500 down 8.4 points.

- I-Net Bridge

Bright outlook for gold

Johannesburg - Demand, and ultimately, the price of gold in 2009 will depend largely on the economic performance of the US and Europe in a global economic environment riddled with uncertainty.

"Everyone is saying that it's a good year for gold," said VM Group analyst Matthew Turner.

RBC Capital Markets analyst Leon Esterhuizen agrees the gold price should gain, but does not expect it to go much higher as demand is depressed, particularly that for gold jewellery.

Esterhuizen, who reckoned the gold price has increased in the first quarter seven out of 10 years, expects it to move up from current levels of about $870/ounce to $900 by end-March.

This compares favourably with Fairfax Securities' estimate of $885/$890 for the end of the first quarter. Thereafter, gold is expected to be seasonally weak in the second quarter, in line with a fall in manufacturing demand.

Manufacturing offtake comprises a relatively large component of overall gold demand, and tends to be softer mid-year as demand for festivals such as Christmas and the Lunar New Year fall away.

Fairfax Securities analyst John Meyer doesn't believe that gold prices will be "oversold in 2009", with the commodity expected to average $850 in the first six months of the year, and the price expected to touch $1 000 per ounce by year-end.

Investment demand for gold is not expected to be that good in the first half of 2009, especially in the second quarter. While the dollar has been volatile it has, nevertheless, proved resilient though the global economic crisis. As a result, investors have parked money in US bonds as one of the safer investment options.

According to Meyer, there will be a balance between the latter and the need to weaken the dollar to stimulate growth. Demand for and, ultimately, the price of gold will be dependent on external factors, notably the performance of the US and European economies.

VM Group, which brings out its gold price forecast later this week, anticipates a recovery in the US in the second half of 2009 as this is what has traditionally happened in previous times of recession.

This may lead to increased interest rates in the US, which will have a negative impact on the investment demand for gold.

Nevertheless, an increase in economic activity towards the end of 2009 and early 2010 should ultimately be good for gold demand, notably in the jewellery sector. This, in turn, will have a positive commodity price effect.

- Miningmx.com

Gold falls as investors end year

New York - Wall Street's fears about fighting in the Middle East eased on Tuesday, sending oil and gold prices lower as commodities investors looked to close the books for the year.

Investors sold gold after it had advanced on Monday amid fighting between Israel and Hamas leaders in Gaza. Contracts for February delivery of the metal fell $1.70 to settle at $873.60 an ounce on the New York Mercantile Exchange.

Gold remains above levels of mid-November when it was hit by heavy selling by hedge funds and other large investors trying to raise cash.

The price of oil also declined on Tuesday after Israeli officials said the nation was considering a 48-hour halt to its four-day air campaign on Hamas to see whether Palestinian militants would stop their rocket attacks on southern Israel.

"On the energy side the geopolitical tensions seemed to be losing their sting a bit," said Edward Meir, senior commodities analyst at MF Global in New York.

Light, sweet crude for February delivery fell 99c to settle at $39.03 a barrel on the New York Mercantile Exchange.

Meir noted that overall trading volume was light as the year ends.

"I don't think anyone's doing anything. Volumes have dried up and they're going to write the year off," he said.

In other Nymex trading, gasoline futures rose about a penny to settle at 87.45c a gallon, while heating oil gained less than a cent to settle at $1.2853 a gallon.

The dollar was lower against the euro and rose against the British pound.

Grain prices have been climbing the past few weeks on the Chicago Board of Trade and rose again on Tuesday after slipping on Monday.

March copper futures added 0.0175c to close at $1.3290 a pound, while March silver rose 16c to close at $10.97 an ounce.

- AP

Gold's 11-week reign ends

Dec 30 2008 10:42

Singapore - Gold slipped on Tuesday as speculators booked profits from a rally to an 11-week high the previous day, but sentiment was still underpinned by conflict in the Middle East and a weaker US dollar.

Gold rallied as much as 24% in 2008, striking a record high of $1 030.80 in March on fears of rising energy costs and as investors diversified into precious metals on the dollar's uncertain outlook.

"There's a reasonable chance we'll see some end-year profit taking in what has been the best performing commodity this year and certainly this quarter," said Mark Pervan, head of Australia & New Zealand Bank research.

"There's been concerns of high political risk in the market. But I think it might struggle to get through $900, unless there's a major flare up again tonight," he said, referring to the fighting between Israel and Hamas in Gaza.

Gold was trading at $873.75 an ounce, down $3.75 an ounce from New York's notional close on Monday, when it rallied to as high as $889.55 an ounce after oil jumped more than $2 on fears Israeli attacks on Hamas could disrupt oil supplies.

Buying from Japanese investors amid fears of a global recession helped gold stay at current levels, dealers said. Gold last traded above $900 in early October, before tumbling to its weakest in 13 months around $680 after a sell-off in equities and fears of a deepening global economic downturn forced investors to cash in to cover losses.

Regaining safe-haven appeal

It slowly regained its safe-haven appeal after stock markets stabilised, with a rebound to around $800 also igniting technical buying.

Israeli warplanes killed 10 Palestinians in attacks that targeted Hamas government buildings and other symbols of the Islamist group on the fourth day of the fiercest air offensive in Gaza in four decades.

Oil fell below $40 on Tuesday as demand concerns overshadowed Middle East crude supply fears amid the Israeli-Hamas conflict, with prices on track to end the year down 60%, their biggest annual loss on record.

"Although gold has the energy to head higher, sustainability would be a key factor," said Pradeep Unni at Richcom Global Services in Dubai, adding that gold had in the past failed to hold on to gains driven by geopolitical tensions.

He pegged resistance around $930 an ounce, a near three-month high hit in early October.

The euro rose to $1.4062 as tensions in the Middle East weighed on the US currency.

Investors are awaiting the release of US consumer confidence for December, due at 15:00 GMT. Economists polled by Reuters expect a reading of 45.0 compared with 44.9 in November.

Platinum was trading at $902.00 an ounce, down $13.50 from New York notional close.

New York gold futures added $0.7 an ounce to $876.0 in electronic trade.

- Reuters