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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: TobagoJack who wrote (38862)	9/26/2003 4:12:24 AM
From: elmatador	Read Replies (1) \| Respond to of 74559

Gold Published: September 25 2003 12:25 \| Last Updated: September 25 2003 12:25 Is the spectre of global inflation rearing its head again? Not according to most economic statistics. But gold bugs are acting as if it is. The price of a troy ounce leapt on Thursday to a seven-year high of $393 - a dazzling 55 per cent up on its low in 2001. Dealers are hoping this market glitter will soon push the price above $400. In part, this reflects an unusual combination of economic circumstances. Higher oil prices, improved US economic data and rising global liquidity have rubbed away global deflationary fears - and provoked interest in gold as an inflation hedge. The Group of Seven meeting has raised the prospect of a weaker dollar, historically supportive of gold. Meanwhile, the recent rout in bonds and unease stalking many equity markets have left investors hunting for places to park funds. The good news for gold bulls is that these macro-economic factors seem unlikely to vanish soon. But before inflation-watchers get too excited, they should note another more mundane factor: de-hedging. Traditionally, gold producers have hedged output against price falls by selling it in forward markets. However, mining groups appear to have been quietly unwinding many hedges this year. Hedge funds have jumped on this trend, creating speculative long positions equivalent to an eye-popping one-quarter of annual global production. However, forecasting this de-hedging process is almost as difficult as prospecting for fresh deposits. Investors wanting to profit from the current gold rush must stay nimble.