Japan may drive gold price to $330
businessreport.co.za
Melbourne - Gold prices might rise to $330 an ounce this year, the highest since 1999, as demand gained in Japan and violence in the Middle East would lead investors to buy the metal as a safe haven, analysts said yesterday.
Goldman Sachs Group this month raised its estimate of the average gold price this year by 5.2 percent to $300 and its long-term forecast to $325. Spot gold has averaged $279.31 an ounce so far in 2002. Gold prices have gained by as much as one-tenth this year as Japanese government limits on bank deposit insurance spurred a tripling of demand for gold from Japanese investors.
Speculation that prices will rise further encouraged companies such as Newmont Mining, the world's biggest gold producer, to spend $8.5 billion in the past six months buying new mines. "What you're getting in Japan is a real crisis of confidence in their banking system," said Brian Bath, the managing director of Australian Gold Refineries, which is half-owned by Newmont and refines two-thirds of Australia's gold production. "People are going into gold coins or any other gold as a defence against any concerns that they have."
Japanese investors bought about 45 tons of gold in the first quarter, up from 12.6 tons a year earlier, the World Gold Council said. The jump occurred before the Japanese government cut insurance coverage on savings accounts of more than '10 million (about R850 000) from April 1. "The Japanese have lost confidence in political leaders to right their economic woes and are buying gold by the bucketload," said Tamara Stevens, the Australian Gold Council's chief executive. Japanese demand might rise again in early 2003 if banking rules were changed again, analysts said. The nation's investors were concerned about the weakness among Japan's banks, which hold about '151 trillion in problem loans.
"The gold boom may emerge again before next April, when the government will expand its limit to other deposits," said Nobuyuki Kudo, a gold researcher at Ace Koeki, a Tokyo-based commodity futures brokerage. "The rising trend in gold demand from Japanese investors will continue."
The outlook for demand is on the agenda as the world's biggest gold producers meet in Melbourne for the Australian Gold Conference, which started yesterday and ends today. Barrick Gold and Placer Dome are due to attend the conference, while AngloGold officials will attend a meeting of the World Gold Council, also in Melbourne tomorrow.
"The underestimation of US interest rates, Japanese investment buying and higher-than-expected Middle East tensions are the three main drivers of our 2002 forecast and for recent gold price strength," Goldman analyst Daniel McConvey said in a note to clients. Concern that the conflict between Israel and the Palestinians may disrupt financial markets and drive stock prices lower encouraged investors to buy gold, fuelling the rally in prices.
Still, if gold prices rose too high they might encourage sales by central banks, capping further rallies, analysts said. Central banks hold 11 years of global gold production. - Bloomberg |
