Gold could hit US$850 an ounce in 2008

SEOUL – Inflation worries and a weak US dollar are likely to push gold prices to the previous record high of US$850 per ounce in the first half of next year, a leading gold analyst said last week.

Risk aversion due to the credit market-crisis and a possible correction of the US stock market will continue to attract investors to gold, Philip Klapwijk, chairman of precious metals consultancy GFMS Ltd., said. “I don’t think it will happen this year …But over the next 12 months I would be very surprised if we don’t see record high prices,” he told Reuters on the sidelines of a conference in Seoul.Gold hit a fresh 28-year peak of US$799,30 per ounce on Thursday as crude oil thundered to a fresh record high and the dollar slumped to all-time lows against major currencies after the US Federal Reserve cut key interest rates.On Wednesday, the Fed trimmed rates by 25 basis points to 4,5 per cent following up on a half-point cut in September as the central bank attempts to limit the economic impact of a housing slump.The bullion market scored an all-time high of US$850 in January 1980, when investors snapped up the metal in the face of high inflation linked to strong oil prices, Soviet intervention in Afghanistan and the impact of the Iranian revolution.”Inflation is beginning to become a bit more of a concern, particularly in the context of lower US interest rates,” Klapwijk said.”We could see negative real-term interest rates in the US next year as the Federal Reserve is likely to cut rates further.This will make gold more attractive,” he added.Gold is used by investors as a hedge against inflation, while a lower dollar makes gold, which is denominated in dollars, cheaper for holders of other currencies.People will look for safe-haven investment tools such as gold, which has been negatively correlated with equities, if stock prices in the US go down next year from current record levels, he added.The precious metal could go up further in the next 12 months although once it breaks through US$850 selling pressure will be tremendous, Klapwijk said.”It depends upon what the situation is at that moment.If circumstances are good, who knows where it goes …maybe over US$900.”He said, however, gold prices probably will undergo a correction after they hit US$800 per ounce in the next weeks.During his presentation to industry experts, Klapwijk said GFMS forecast gold to trade in a range between US$720 and US$880 an ounce next year, and suggested an average price of US$770 in 2008.Nampa-Reuters”I don’t think it will happen this year …But over the next 12 months I would be very surprised if we don’t see record high prices,” he told Reuters on the sidelines of a conference in Seoul.Gold hit a fresh 28-year peak of US$799,30 per ounce on Thursday as crude oil thundered to a fresh record high and the dollar slumped to all-time lows against major currencies after the US Federal Reserve cut key interest rates.On Wednesday, the Fed trimmed rates by 25 basis points to 4,5 per cent following up on a half-point cut in September as the central bank attempts to limit the economic impact of a housing slump.The bullion market scored an all-time high of US$850 in January 1980, when investors snapped up the metal in the face of high inflation linked to strong oil prices, Soviet intervention in Afghanistan and the impact of the Iranian revolution.”Inflation is beginning to become a bit more of a concern, particularly in the context of lower US interest rates,” Klapwijk said.”We could see negative real-term interest rates in the US next year as the Federal Reserve is likely to cut rates further.This will make gold more attractive,” he added.Gold is used by investors as a hedge against inflation, while a lower dollar makes gold, which is denominated in dollars, cheaper for holders of other currencies.People will look for safe-haven investment tools such as gold, which has been negatively correlated with equities, if stock prices in the US go down next year from current record levels, he added.The precious metal could go up further in the next 12 months although once it breaks through US$850 selling pressure will be tremendous, Klapwijk said.”It depends upon what the situation is at that moment.If circumstances are good, who knows where it goes …maybe over US$900.”He said, however, gold prices probably will undergo a correction after they hit US$800 per ounce in the next weeks.During his presentation to industry experts, Klapwijk said GFMS forecast gold to trade in a range between US$720 and US$880 an ounce next year, and suggested an average price of US$770 in 2008.Nampa-Reuters

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