07 April 2006

Have you seen what Gold is doing?

Gold eases on day, gains $6 for week
April 7 (from MarketWatch) -- Gold futures fell more than 1% Friday, but ended the week $6 higher as investors mulled over the precious metal's success in reaching the $600-an-ounce level, but failure to surpass it during the regular day sessions. "Volatility will keep traders second-guessing themselves," said Peter Spina, an analyst at GoldSeek. The COMEX June gold contract closed down $7 at $592.70 after an overnight high of $603.10 -- its highest intraday level since January 1981. It's no surprise to see some pullback and profit-taking after gold prices hit $600 on Thursday, said Amaury Conti, a trader at Austin, Calvert & Flavin. Strength in the U.S. dollar also weighed on gold, he said, offering a "good opportunity to take some profit and look to re-enter [the market] lower." Taking a look at the bigger picture, "all the catalysts ... [the] weaker dollar, rates, declining mine supply, alternative asset class, growing demand from China and India, have aligned," he said. Overall,
analysts expect higher prices for gold going forward and for the long haul. "As major central banks continue to irresponsibly flood the world with easy credit and excess liquidity, gold is increasingly reclaiming its former glory as the preferred coin of the realm," said Peter Schiff, president of Darien Connecticut-based EuroPacific Capital. He claims that investors are "fooled by the government's campaign to disguise inflation" through promotion of such distorted measures as the 'core' CPI. While prices of most goods are rising, "those higher prices somehow never show up in government inflation indexes," he said. But "action in the gold market reveals the truth. For my money, I believe what I see, not what the government tells me, which is why my money is in gold," he said. From these levels, "the price of gold could go even higher, given that it still has not eclipsed the 1980 inflation adjusted peak of nearly $2,200 an ounce," said Brian Hicks, co-manager of the Global Resources Fund. "We believe the recent strength in gold is due in part to growing participation from more mainstream institutional investors such as pension funds, and not simply the result of short-term hedge fund buying," he said. "Investors are sensing that we may be near an end to the Fed's current rate tightening cycle, which has supported the U.S. dollar despite rapidly growing trade and budget deficits," Hicks said. All of that may "push the price of gold over $600 an ounce in the near term and as much as $700 an ounce by year-end."

No comments: