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Gold May Top 15-Year High as Dollar Falls vs Euro, Survey Says
Oct. 4 (Bloomberg)
Gold prices may rise above the 15-year high of $433 an ounce this week on speculation the dollar will decline and spur investor demand for the precious metal, a Bloomberg survey showed.
Twenty-seven of 44 traders and investors surveyed Sept. 30 and Oct. 1 predicted prices will rise for a fifth week. Ten forecast a decline and seven said prices would be little changed. Gold reached a five-month high of $421.90 an ounce Oct. 1 and had its biggest weekly gain since mid-August.
Zitat``There is a good chance gold will break out to a new high given weakness in the dollar,''
said George Ireland, 48, who manages about $100 million at Boston-based Ring Partners LP, which trades in bullion and shares of gold-mining companies.
Gold has climbed 13 percent from a six-month low of $371.30 in early May on speculation that record-high energy costs will curb U.S. economic growth, reducing demand for the dollar. The U.S. currency's decline against the euro last week was the biggest since the five days ended Sept. 10.
The majority of gold investors and analysts correctly predicted the market's direction in 12 of the 24 weeks since the debut of the Bloomberg survey, including the past five weeks.
Eighty-five percent of the time, gold moves in the opposite direction of the dollar, said Gregory Wilkins, chief executive of Toronto-based Barrick Gold Corp. Gold has benefited from speculation that the dollar's decline will help accelerate inflation, which erodes the value of assets such as stocks and bonds.
`Latent Inflation'
Zitat``There is a lot more latent inflation going forward, which I believe will be beneficial to the gold industry,''
Wilkins, 48, said last week during a presentation at a gold conference in Denver.
Gold for December delivery rose $11.50, or 2.8 percent, to $421.20 an ounce last week on the Comex division of the New York Mercantile Exchange. Prices are up 9.4 percent in the past year.
The Tocqueville Gold Fund, with about $500 million in assets, is seeking shareholder approval Oct. 22 to double its allowable purchases of gold bullion to 20 percent of total assets, partly because of declines in the dollar.
Zitat``We're going to see new highs in gold before year-end, certainly next year,'' said John Hathaway, 63, who manages the New York-based Tocqueville fund. ``Owning physical metal is a more conservative way than owning higher-risk gold shares to participate in the favorable macroeconomic environment for gold, including a falling dollar.''
Matthew Turner, an analyst in London at Virtual Metals, is among the 10 survey participants who expect gold to fall this week. Gold's 7.9 percent rise in March to the 15-year high on April 1 was followed by seven straight weekly declines.
Uncomfortable Prices
Zitat``The price hasn't been very comfortable at these levels all year,'' Turner said.
Prices topping $433 this week would be a sign that any demand for gold is speculative and ``would not be constructive'' for the rally, said Carlos Perez-Santalla, president of Hudson River Futures in New York. He expects a rise this week that will fall short of the 15-year high.
Hedge-fund managers and other large speculators are betting prices will keep rising. They increased their net-long position in New York gold futures in the week ended Sept. 28, the U.S. Commodity Futures Trading Commission said Oct. 1.
Speculative long positions, or bets prices will rise, outnumbered short positions by 82,118 contracts on the Comex, the most since Aug. 27, the commission said. Net-long positions, which peaked this year at 144,253 on April 9, rose by 17,791 contracts, or 28 percent, from a week earlier.
Goldman Forecast
Goldman Sachs Group Inc. in a Sept. 28 report said gold will trade in a range of $390 to $450 an ounce in the next six to 12 months as the dollar falls and mining companies reduce their fixed-price sales contracts, limiting supply. Gold last traded at $450 an ounce in July 1988.
``Gold prices are likely to remain between $414 and $425,'' said Prithviraj Kothari, director of Riddhi Siddhi Bullion Ltd. in Mumbai. ``There is interest from hedge funds and gold prices may remain in the higher range of $420-$425 if oil prices move further up.''
Crude oil prices that reached a record $50.47 a barrel last week are forecast to rise this week, according to a separate Bloomberg News survey. Higher energy prices probably will help send the dollar lower on expectations for slower economic growth, another Bloomberg survey showed.
Rising oil prices and a falling dollar are positive for gold, said Frank McGhee, head gold trader at brokerage Alliance Financial LLC in Chicago.
Zitat``If oil prices continue to rise, I would expect that you will see Arab buying of both the euro and gold as they look to defend the value of the petrodollars they are receiving,'' McGhee said.
Central banks in the Middle East, source of about a quarter of the world's crude oil, as well as Argentina, have been buying gold, Tocqueville's Hathaway said.
Central banks are the largest holders of bullion.
To contact the reporter on this story:
Claudia Carpenter in New York at Ccarpenter2@bloomberg.net
To contact the editor responsible for this story:
Steve Stroth at sstroth@bloomberg.net
Last Updated: October 3, 2004 19:03 EDT
