RECORD LOW FOR GOLD SUPPLY, SAYS INVESTMENT VETERAN
By Sara Smith 15:30:54 | 15 April 2008
Citywire
Fund Selector Edition
Gold supplies are at an all-time low and may drop by as much as 15% over the next five years, according to BlackRock’s precious metals investment veteran Graham Birch.
The Citywire AAA-rated manager, whose MLIIF World Gold Fund celebrates its 20th anniversary this month, said that a lack of new production is resulting in tension between jewellery and investor markets.
Birch said that during the 1990s growing mine supplies caused the jewellery market to surge ahead as the prime driver for gold. However, he said the decline in production has seen jewellery demand displaced by investor demand.
‘Investor demand has really come back to life as people have realized that gold is a rare commodity,’ he said.
Supply is low however, as gold exploration in the past 10 years has been minimal and although exploration spending has increased, it can take up to seven years for a mine to become fully functional.
He also pointed out world gold mine production peaked in 2001 but is now falling. It was down by 1% in 2007 and 3% in 2006.
Birch said: ‘During the 1990s, the price of gold was kept low by central banks selling off substantial parts of their reserves, adding to supply in the market. As gold prices fell, gold mining companies scaled back exploration and reduced spending on existing assets. Investment has not kept pace with the subsequent rise in the gold price, so new gold supply is hard to come by.’
Ongoing power shortage issues are adding to the problems seen in precious metal production added Birch.
In particular, power issues in South Africa have had a huge impact on platinum production as blackouts occur frequently and shut down output completely.
The manager warned that the markets will be hearing more about commodities being affected by power issues in the near future.
Gold News & Views
Gold could break the $1,500/oz barrier
David Rosenberg, Merrill Lynch North American Economist, discusses the resurrection of inflation expectations and its potential impact on gold prices. "We reiterate that gold is in a secular, not merely cyclical, bull market.
Indeed, gold formed a very similar bottom formation in 1999 as the S&P 500 did back in 1982. And, if this plays out like other secular bull markets have in the past – emerging markets, bonds, stocks, oil, real estate – then this is a run that can be expected to last at least another five years and ultimately see bullion break the $1,500/oz barrier.
Reprinted from Merrill Lynch, North American Precious Metals Weekly Report, April 9 , 2007
Gold Rises on Demand for Dollar Alternative
By Pham-Duy Nguyen
April 13 (Bloomberg) -- Gold in New York rose to the highest in almost a year as a decline in the value of the dollar boosted the appeal of the precious metal as an alternative investment. Silver also climbed.
Gold generally moves in the opposite direction of the dollar, which fell to the lowest in more than two years against six major currencies. Before today, gold had gained 6.5 percent this year, while the dollar index has dropped 1.5 percent.
``The dollar weakness is catching up to gold,'' said Ron Goodis, futures trading director at Equidex Brokerage Group Inc. in Closter, New Jersey. ``Gold looks strong.''
Gold rose $10.20 to $689.90 an ounce on the Comex division of the New York Mercantile Exchange, the highest closing price for the most- active contract since May 17.
The dollar fell to the lowest against the euro in more than two years on speculation Europe's economy will outpace the U.S. Consumer confidence in the U.S. fell in April for the third month. The U.S. currency was also down against the British pound, the Japanese yen and the Canadian dollar.
``Gold's rally is mostly off the dollar weakness,'' said Billy Flahive, a trader at Eagle Futures Inc. in New York. ``If gold can get above $688, there'll be good follow through.''
Gold is Awaiting Its Day
Paul Brown, wrote in the March 3, 2007, NY Times:
A STOPPED clock is right twice a day. The proverbial blind squirrel probably does find the occasional acorn. And all those people who have been arguing for years, frequently on infomercials and in advertisements on talk radio, that the price of gold is going to increase drastically may finally be correct, Bloomberg Markets writes.
The swooning dollar, which has become a proxy for the slowing American economy and its inability to reduce its trade and budget deficits “is making gold Wall Street’s darling,” Pham-Duy Nguyen writes.
“Investors who sell assets denominated in the U.S. currency often buy gold,” according to the magazine. “Declines of more than 20 percent for the dollar against six major currencies led to a gold rally of 22 percent from January 1971 to July 1973 and 95 percent from June 1976 to October 1978.”
An expert tells Bloomberg Markets that the price of gold will top $730 an ounce this year and forecasts that the price will reach $3,000 an ounce within the decade.The price of gold closed at $642.45 yesterday
NEW YORK (MarketWatch) -- Gold rose sharply Friday, as the dollar fell to a more than two-year low versus the euro, boosting demand for Gold.
Gold closed up $10.20 at $689.90 an ounce on the New York Mercantile Exchange. "Gold finally made a successful attempt at overcoming resistance at the $682/$685 level, after the US dollar sank to a 24-month low against the euro and oil prices firmed," said Jon Nadler, analyst at Kitco Bullion Dealers.
"A combination of adverse factors keeps gnawing at the US currency and may leave the Fed in the unwelcome predicament of having to boost rates to throw out a life-preserver to the greenback," Nadler said. The dollar fell to a more than two-year low versus the euro, on expectations this weekend's meetings of G7 and International Monetary Fund will call for a weaker dollar to help adjust global imbalances.
