The gold price was expected to gain strength after its significant sell-off since July, and could reach up to $900/oz, and perhaps over $950/oz in the next few months, said precious metals consultancy GFMS on Wednesday.
GFMS believed that the recent dollar recovery was an “ill-founded temporary phenomenon”, and cited rising US unemployment, possible slips in confidence in the US government’s creditworthiness, and the realisation that there might be little to no narrowing of the US:Eurozone interest rate spread in this year, as the drivers that could undermine the dollar.
It was, however, felt that the mid-March record high of $1 011,25 was unlikely to be beaten this year. The gold price stood at around $830/oz on Wednesday.
“There was an element of ‘the perfect storm’ to the first quarter. stone crusher machinery for sale hyderabad Not only did we see the slashing of US interest rates but there was also the surge in oil prices, falling equity markets and massive write-offs by the banks – not forgetting Bear Stearns’ collapse either. And it’s difficult to see all that coming together in quite the same way in the next few months,” added GFMS researcher Philip Klapwijk.
Other factors considered important to the pick-up in investor interest included the general rise in commodity prices; the broadening of the investor base; inflation concerns and the perception of a likely loosening of many countries’ monetary policies.
Thus, GFMS said the periodic liquidations seen after the March high were attributable, not just to the end to dollar weakness and its subsequent recovery, but also to a need to remove some ‘froth’ from an overbought market, the retreat in the oil price and signs that the US economy might not be the first or most likely to suffer from a full-blown recession.
“We’re expecting Central Bank selling to fall yet further in the second half. That should not only provide direct support, but also reassure longer-term investors. stone crusher machine manufacturer in gujarat Don’t forget, it’s largely just the short-term players that have bailed out to-date,” said Klapwijk of investor activity that could be the prime determinant of price behaviour.
The heavy fall in central bank selling in the first half, for example, was seen as another supportive factor and one helping to explain why the price did not continue falling after the initial bout of investor selling, the GFMS stated.
It added that supply, in general, was supportive, and scrap, while growing, did not get close to the record set in the first half of 2006, as people delayed selling in the expectation of higher prices. For a noticeable pick-up in scrap to take place, prices sustained at over $950/oz, or even $1 000/oz would have to be realised.