Investment outlook has gold fans aglow
>>"Gold investment demand has been surprisingly subdued given what has happened in the markets," Birch said.
That may be starting to change. Investor demand for gold almost doubled in the first half of the year, according to a report from Gold Fields Mineral Services, a London-based consulting firm.<<
By Steve Raabe
Denver Post Business Writer
Thursday, October 03, 2002 - Gold boosters, ever the optimists, offered a glittering forecast this week for gold's investment potential.
Gold prices could reach $1,000 an ounce in the next five to 10 years, up from the current $325, said John Hathaway, manager of the Tocqueville Gold Fund in New York.
He said the turnaround in gold could occur as investors become increasingly wary of stocks, bonds and other traditional financial investments.
"When gold gets to four digits (in price), it won't be because investors love gold. It'll be because they despise other assets," Hathaway said at the Denver Gold Group's Mining Investment Forum, an annual event that brings top gold companies, investors and analysts to Denver.
Gold prices have risen handsomely over the past year, in concert with a declining stock market. They hit a low of about $253 an ounce in July 1999 in a market driven by Internet and telecom madness.
But gold futures had their biggest daily gain in almost eight weeks earlier this week as plunging stock prices made the metal more attractive as an alternative investment.
Declines in stocks have contributed to a 17 percent rise in gold prices this year.
"The pressure on the stock market and the economic malaise is helping gold rally," said David Meger, a senior analyst at Alaron Trading Corp. in Chicago. "We expect that trend to continue."
Earlier this week, gold for December delivery rose $4.10, or 1.3 percent, to $325.20 an ounce on the Comex division of the New York Mercantile Exchange, the contract's biggest one-day gain since Aug. 7.
By Wednesday, gold had given up some of its earlier gains, trading at $322.20.
Despite the surging market, gold has been slow to attract investors, who view it as a "pariah" since its two-decade decline after reaching a record high of $850 an ounce in 1980, said Graham Birch, managing director of Merrill Lynch Investment Managers.
Birch said his investment unit now recommends to clients that they invest 5 percent of their assets in gold "as an effective side bet."
Not many have adopted the advice, he said.
"Gold investment demand has been surprisingly subdued given what has happened in the markets," Birch said.
That may be starting to change. Investor demand for gold almost doubled in the first half of the year, according to a report from Gold Fields Mineral Services, a London-based consulting firm.
Bloomberg News contributed to this report.
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