When will gold hit $1,000 again?
Yellow metal breaks link with $; fears over Europe economy.
M.R. Subramani
Chennai, Jan 25
Last week, we witnessed gold touching a four-month high of $903.50 before
dipping and ending at $895.30 an ounce for January contracts. April contracts,
too, ended at a high of $897.70. Gold gained 4.3 per cent on Friday and the
close was at a high that has not been witnessed since October 8.
Gold touched record highs in euro (685.70 euros an ounce), sterling pound
(648.51 sterling) and rupees (Rs 14,110 for 10 gm) during the weekend.
Spot prices also gained in tandem to end at $894.54 an ounce, after touching
$903.34.
The fact that gold topped $900 has made analysts, experts, investors and buyers
sit up and take notice of the developments. The question that naturally comes
to everyone's lips is will gold hit $1,000 again and when?
Current rally
Before we can delve on that, it is important to know the reason behind's gold's
current rally. An important feature of this rally is that gold's movements now
seem to be de-linked from that of the dollar. Usually, a strong dollar puts
pressure on gold. But the weakness in European currencies caused by the crisis
the banks there are facing are forcing buyers to opt for gold.
quality investment
Call it flight to quality investment or investors' lookout for haven. This has
led to investors selling of sovereign debts due to fears over how the economic
crisis will be handled by various nations. This is leading to weakness in
currencies in Europe and Asia.
And the dollar's rise against other currencies is not due to fundamentals.
That's one of the reasons why gold does not seem to follow the fortunes of the
US currency.
On the other hand, gold holdings by SPDR gold trust, world's largest, are at a
record 819.11 tonnes (of 204.62 pounds each).
So, will this mean gold will soon hit $1,000 soon? Not exactly. Much of gold's
progress will depend on what happens at current levels and how other markets
such as equities behave. There is no doubt that gold is seen as the ultimate
hard assets and has tremendous potential in the long term but what has to be
taken note is during the weekend itself, the precious metal has come off $900
after crossing the mark. A pessimistic view also sees gold losing $100 from
here.
Positive aspect
But the overall consensus among experts is that gold may stall around $900. One
positive aspect to take note of is that large speculators have built long
positions on the yellow metal. Open positions of long ones were 3,31,507 during
the end of last week against 3,18,185 the previous week.
Gold has key support at $866 and below that it could be well supported at $814.
In India, February gold contracts will be well supported at Rs 13,980 and Rs
13,950 for 10 gm but they could face resistance at Rs 14,290 and beyond that at
Rs 14,310 on MCX, according to Angel Commodities.
Silver, which closed at $11.94 an ounce, is expected to toe gold.
The fortunes of crude and metals will depend on what steps the US President, Mr
Barack Obama, takes to revive the US economy and how the economy responds to
the stimulus packages.
http://www.thehindubusinessline.com/2009/01/26/stories/2009012650190500.htm
ekamber
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