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Gold bugs, hum-bugs collide
Little shield: A worker displays a small gold bar in the Austrian Gold and Silver Separating Plant Oegussa in Vienna. Picture: Reuters
Thursday, June 4, 2009
WITH gold poised to lurch above US$1,000 an ounce for a third time, the lines are being drawn between bulls who believe a dollar-hedging rally has only just begun and bears who say four-digit bullion will be fleeting.
Fuelled by expectations of growing inflation after aggressive government pump-priming measures around the world to help prevent major economies from falling deeper into recession, spot gold prices have risen 14 per cent in two months.
Prices were up in yesterday's trading nearly one per cent at almost US$990 an ounce, within sight of the US$1,000 mark first hit in March 2008 and last touched on Feb 20. Despite briefly trading in four-digit territory on three separate days, prices have closed above the mark only once, on March 17, 2008.
Big bulls say expectations of further US dollar weakness, a recovery in stocks that has bolstered investment funds' purchasing power, and concerns about the inflation outlook should help drive the spot market into uncharted territory beyond the US$1,030.80 intraday record high touched last year.
But bears cast doubt on the sustainability of gold buying, saying the dollar's current weakness is tied to too much optimism about the economic and financial outlook and that other fundamental factors will put a lid on gains.
While gold's rally late last year and early this year was fuelled by financial insecurity and justified fears of recession, the latest leg-up has been driven by concerns that the dollar may slide further as investor risk appetite improves on growing signs that the global economy has emerged from its worst state.
Yukuji Sonoda, an adviser to Daiichi Commodities Co in Tokyo, said gold could quickly rise to a record high US$1,100 an ounce on its way to US$1,300 an ounce within the next few months.
Concerns about the risk of the US sovereign rating losing its triple-A status on a ballooning budget deficit and its future as a reserve currency have also weighed on the currency. Some say the purchasing power of the US dollar could be substantially less years from now.Reuters
Fuelled by expectations of growing inflation after aggressive government pump-priming measures around the world to help prevent major economies from falling deeper into recession, spot gold prices have risen 14 per cent in two months.
Prices were up in yesterday's trading nearly one per cent at almost US$990 an ounce, within sight of the US$1,000 mark first hit in March 2008 and last touched on Feb 20. Despite briefly trading in four-digit territory on three separate days, prices have closed above the mark only once, on March 17, 2008.
Big bulls say expectations of further US dollar weakness, a recovery in stocks that has bolstered investment funds' purchasing power, and concerns about the inflation outlook should help drive the spot market into uncharted territory beyond the US$1,030.80 intraday record high touched last year.
But bears cast doubt on the sustainability of gold buying, saying the dollar's current weakness is tied to too much optimism about the economic and financial outlook and that other fundamental factors will put a lid on gains.
While gold's rally late last year and early this year was fuelled by financial insecurity and justified fears of recession, the latest leg-up has been driven by concerns that the dollar may slide further as investor risk appetite improves on growing signs that the global economy has emerged from its worst state.
Yukuji Sonoda, an adviser to Daiichi Commodities Co in Tokyo, said gold could quickly rise to a record high US$1,100 an ounce on its way to US$1,300 an ounce within the next few months.
Concerns about the risk of the US sovereign rating losing its triple-A status on a ballooning budget deficit and its future as a reserve currency have also weighed on the currency. Some say the purchasing power of the US dollar could be substantially less years from now.Reuters
source: Brunei Times
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