Will Gold Regain Its Glitter?
By Lindsay Williams
14 Jun 2006 at 09:00 AM EDT
JOHANNESBURG (Business Day) -- Classic Business Day speaks to James Moore from TheBullionDesk.com about four months back when the gold price is about $550 and they suggest it will spike $670 or $700 an ounce. Gold recently gets to $730 an ounce, but is now well below $600.
LINDSAY WILLIAMS: TheBullionDesk.com was right on the first count, but what now? Earlier today gold touched $575. James, we are a little bit shell-shocked here in South Africa - what’s going on with this gold price? It’s nearly $30 down on the day.
JAMES MOORE: It certainly has been a very active day for the gold market, obviously with prices heading south. What we’ve seen over the past few weeks is a shift of money away from commodities back towards treasuries - particularly with the speculation that the U.S. Federal Reserve and other central banks are looking to hike interest rates as a hedge against inflation.
LINDSAY WILLIAMS: You were very adamant about your spike to $670 to $700 - that was when the gold price was well below $600 an ounce. You’ve been absolutely right - does that mean it’s all over?
JAMES MOORE: Certainly not by a long stretch. I think gold has still got plenty of upside potential. Obviously what we’ve seen is a very sharp rally - and a very sharp sell-off. That’s created quite a few jitters amongst the more recent influx of investor interest into the market. I think there’s still far too many unknown factors globally, and also financially - looking at economic stability out there - to really warrant gold prices falling significantly lower. I think as we head towards the end of the year - particularly the end of the third, and start of the fourth quarter - that we are going to see prices move higher again, and I think we are going to finish the year back above $650.
LINDSAY WILLIAMS: But not to new highs. The spike was to about $730.50 an ounce - do you think we can manage to get above that, or is your $650 call the best we can hope for?
JAMES MOORE: No, I think we are going to see high highs. A lot of people are still calling for $1,000 an ounce. Whether we can get to that level - personally I can’t quite see $1,000 but I do believe we are going to match the all-time high that we saw back in the early 1980s. I think $850 an ounce is certainly a realistic high - not this year, but I think we are going to be seeing those levels early next year.
LINDSAY WILLIAMS: Do you think the speculators have just got a little bit over-extended. Has the open interest on the New York Commodity Exchange become a bit too high, and it’s unsustainable because of that? Is this just the bursting of a mini short-term bubble?
JAMES MOORE: It certainly is - and that’s the view that I have for when we reach above $700. The rise we saw was very rapid - there was a sudden influx of really hot investor money from hedge funds, CTAs and individual investors. That’s done a bit of a U-turn - I think this is why we’re seeing quite a sharp fall-back. It’s certainly not the end of the bull market - there’s far too many reasons not to be long of gold. I think we are going to move back - closing the year back above $650 an ounce, and looking at a target of $700 to $800 by early 2007.
LINDSAY WILLIAMS: So this is quite healthy - the hot money is then being replaced by real money? Could the real money be in the form of central banks like the Russian or Chinese?
JAMES MOORE: I think that is certainly realistic - particularly if you look at the U.S. economy, I’m quite surprised that the dollar has managed to stay as firm as it has. Obviously we had a lot of rumours that central banks were looking to reduce their dollar holdings - I think this is still a very viable risk to the dollar. Looking at the U.S. economy, it’s still facing some massive deficits - which by no means are shrinking, and are looking to get a little bit bigger - and then we have to look at the growing economy of China, and their appetite to hold gold. I think even if we see a 1% to 2% increase in Chinese central bank reserves - the impact that’s going to have on the gold market is going to be quite phenomenal, and again that’s going to add to the bullish mood that we are going to see towards the end of the year.
LINDSAY WILLIAMS: So we should be buying the dips in the dollar gold price?
JAMES MOORE: Certainly.
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