Andy Smith from Mitsui on gold:
Do I remember correctly that he was then analyst who last year thought gold was going down and wouldn't rise
above $300. This is from one who has a very faulty memory. I will check him out, if no one else remembers.
Ro
CBSMW Thom Calandra's StockWatch: Noted gold analyst's forecast sure to turn heads
Thom Calandra's StockWatch
Party-spoiler or clever realist
Major commodities analyst sees minor gold rally
By Thom Calandra, CBS.MarketWatch.com
Last Update: 10:14 AM ET Jan 17, 2003
SAN FRANCISCO (CBS.MW) - With gold's spot price near a six-year high, noted gold
analyst Andy Smith on Friday released his annual price forecast for the rallying metal.
Smith, quipping that author J.K. Rowling took longer to produce the fifth Harry Potter book
than he had to issue a forecast, is bound to disappoint gold investors with his view. The
Mitsui Global Precious Metals analyst calls for an average price of $335 an ounce for 2003.
Spot gold's price Friday was flirting with six-year highs at $358 an ounce. The dollar was
faltering, with the euro surpassing the $1.065 mark for the first time since October 1999.
Smith, based in London, pegs the 2003 low for gold at $310 an ounce and the high at
$385. This week, several London and New York bullion analysts issued optimistic
forecasts for gold. UBS Warburg's John Reade called for an average $353 an ounce in
2003. See: Gold gets Wall St.'s attention.
Smith, in issuing his forecast, asserts that the
mixture of war talk, fiscal turmoil in Latin
America, reduced producer hedging of the
metal and disenchanted stock-market investors
have benefited gold to a great degree. The
metal was up about $66 an ounce, or 24
percent, in 2002.
Smith, for more than a decade until the
September 2001 attacks on U.S. soil, was
correctly negative on gold's prospects. He now
says "the pace of gold-friendly political and
economic shocks hitting the fan since 9/11 cannot possibly be sustained. Into the past 15
months has been crowbarred every kind of crisis experienced in the three previous
decades." See: Gold's recent convert is no long-term bull.
In Smith's view, the rush to gold has more resembled a trickle -- a blip on the screen of
global capital flows. Smith, based in London, points out the sales of American Eagle gold
coins amounted to $140 million from September 2001 to November 2002, or less than the
total takings of the movie "American Pie II."
Smith maintains few new investors are buying actual bullion. "Between September 2001
and the end of November 2002, by far the biggest gold investors were miners themselves,
closing or buying back their hedge positions," he says. The world's largest miners, among
them Barrick Gold (ABX), Newmont Mining (NEM), Placer Dome (PDG) and Anglogold (AU),
are reducing their forward-sales of the metal, a practice that for years weakened gold
prices by contributing to bullion-bank leasing and selling of the metal.
Smith, charting gold investment from September 2001 through November 2002, estimates
hedge-book reduction by those four large miners contributed $4.9 billion of gold
purchases. Yet a combination of gold Eagle purchases, inflows into U.S. mutual funds that
invest in miners and New York futures speculators who were "long" the metal amounted to
just $730 million.
The practice of de-hedging, seen as a great boost to the stock prices of the world's largest
miners, is no longer likely to impress investors, Smith says. "Shareholders may rightly
perceive that much of the inflammatory derivative matter allegedly ticking in hedge books ...
has been detoxed," he says in his report.
Smith, in presenting his lengthy forecast on gold (and silver, platinum, palladium and
rhodium), gives marquee status to his technical analyst, Amanda Sells. Her view is more
optimistic.
Sells, an independent consultant to Mitsui Global, sees "a dramatic change" in gold's
long-term position. She says five years of resistance to the $320 level" is now busted.
While the metal could suffer a setback (to $328 an ounce), Sells predicts "the break is a
major one and augurs a significant shift and rise in the trading price of gold, with a move to
and beyond the $403 target feasible."
This week, another technical analyst, Jordan
Kotick at JP Morgan, stated gold could
approach $430 per ounce in coming years.
See: JP Morgan technician sees $430 gold
possible.
Technicians are paid to create charts and
ignore most of the "reasons" why a commodity
or security is popular or unpopular. I asked
Mitsui's Smith about the technical part of his
yearly forecast.
"On Amanda, it is deliberate that some creative tension be built into the report between
Amanda's view and mine," Smith told me Friday morning. "Amanda does her own thing. Me
mine. I finish my scribbles always before Amanda contributes. I don't have a model linking
my approach and hers."
Smith's 2002 gold-price forecast came close to pegging the high point for gold. He forecast
a 2002 high of $355 an ounce, a level the metal reached Dec. 19.
Soon after the Sept. 11, 2001, attacks, when gold flirted briefly with $300 an ounce, Smith
placed a $340 price target on the metal. "Gold is clearly on death's door with the lack of
interest, but these are not normal times," he said at the time.
Smith's comments and published research, sent to Mitsui's institutional clients, turned
heads in the gold trade. He had been mostly negative on gold's prospects for 14 years.
See the story.
Will this fresh forecast disappoint gold's long-suffering supporters?
"I do not write to win popularity," Smith tells me. "Having written, though, and taken twice as
many pages this year to explain a view as it did last year, a fair take would be that I am
twice as confused, half as sure."
Smith adds, "And - extrapolating this reasoning further -- the price movement may be less
clear, too." |
