GFMS Sees $700 Gold By Year-End
09/14/06 - 04:30 AM EDT
Simon Constable
Gold investors unnerved by the recent downdraft may just want to sit tight.
That's because investment demand could boost bullion prices to over $700 an ounce by year-end, according to the Gold Survey 2006 -- Update 1, published Thursday morning by London-based specialty consulting firm GFMS. If the authors' predictions prove correct, gold prices will rise about 17% above Wednesday's close of $596.50 an ounce for December-dated futures. It would also place the yellow metal back into territory not seen since last spring, when the spot price hit a 26-year high of $725.25 on May 12. Contributing factors, the GFMS report asserts, include a "bleak outlook" for the U.S. dollar due to a "problematic U.S. housing market," an "extremely volatile [Middle East] contributing to a general unease," as well as the "perceived threat of global terrorism," which should all contribute gold's allure as a safe haven. GFMS does, however, caution that a general economic slowdown could hobble any embryonic rally if gold gets caught in a general commodities rout, and with liquidation of long positions and stop-loss selling accelerating sliding prices. The company sees a "full blown exit by investors" as very unlikely. The exchange-traded funds that hold bullion, streetTRACKS Gold Shares(GLD Quote - Cramer on GLD - Stock Picks) and iShares Comex Gold Trust(IAU Quote - Cramer on IAU - Stock Picks), would be likely to benefit from increased investment demand, as would gold miners such as Newmont (NEM Quote - Cramer on NEM - Stock Picks), Barrick (ABX Quote - Cramer on ABX - Stock Picks) and Goldcorp (GG Quote - Cramer on GG - Stock Picks).
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