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Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: marek_wojna who wrote (86180)	5/31/2002 8:11:49 PM
From: marek_wojna	Read Replies (2) \| Respond to of 116816

Didn't take long for Barclays to come up loaded with the ammunition of CB's vaults full of gold, don't recall this kind of warnings from the BIG ones when the real bubble was about to burst: <<<ODJ Barclays Capital Fears Gold's Bubble May Burst, Price Drop -- Says Safe-Haven Buying "Misleading" -- U.S. Dollar Weakness Already Factored Into Price -- Higher Prices Will Choke Off Consumer Demand - Negate Impact Of Producer Buybacks By Gavin Maguire London, May 31 (OsterDowJones) - Barclays Capital argues the recent gold rally "does not stand up to the rigors of its own data or its own fundamentals," and that a return "towards $290-300 per ounce could be no more than a burst away," in a research note released Friday. "Far from boosting demand for gold, political turbulence in the Indian region is actually eroding it," it argued. The scenario of U.S. dollar weakness seems already to have been factored into prices, Barclays added. "The key behind the speculative buying of gold was the spark provided by Newmont's announcements regarding its future intentions for the closure of Normandy's hedge portfolio during the high profile battle for control of the company against AngloGold," Barclays said. "The rationale which lay behind large-scale speculative buying is weakening and holes in gold's bullish arguments are appearing. Plugging these holes with (what people conveniently attribute to) "safe haven" buying is just plain misleading," it added. The real driver of the gold price has been delivery by producers into forward contracts (gold that has already been sold) and buybacks of gold without replacement of new hedge positions, according to Barclays. "Balance this against massive falls in demand from consumers and the net effect? Near zero. "The net change to the gold market's arithmetic? Near zero. The chances of the gold rally continuing at this pace...?" it asked. "The current gold price rally is not indicative of a market which has found its footing. The arithmetic suggests that every extra tonnage of demand from producers delivering into hedges leads to a corresponding reduction in demand from consumers," Barclays said. "Claims that gold is acting as a safe haven for investors who don't know which way to turn show a lamentable lack of understanding of the gold market and its issues," it declared. "With most of gold's gains now behind it, the risks of profit taking and liquidation should begin to outweigh risks of fresh price increases, particularly if $340 per ounce is reached," Barclays said. At this level even producer buying "would likely exit the market and consumers would be driven even further away from it - and could in fact turn net sellers as dishoarding is encouraged," it argued. High prices and a reduction in hedged supply have created a vacuum in their wake, which is sufficient to "suck in greater levels of selling from elsewhere such as the 30,000 tons held by central banks," according to Barclays. "This fact is well-known but is not reflected in the current producer-driven and speculatively-fueled rally. "Safe haven? Gold prices are riding on a micro-economic, frothy bubble which is at risk of bursting. They reflect producer maneuvers, are far from safe at current levels and we do not believe they represent a sound conduit for investors here," Barclays said. "When the sums are done the net change in fundamentals could amount to zero and the return towards $290-300 per ounce could be no more than a burst away."