Fitch Ratings report on Gold

2 september 09

The price of gold is not expected to move too much in the short term, at least until the next real shift in global markets, Fitch Ratings said on Wednesday.

In a report on the outlook for the yellow metal, Fitch analysts predict that, while the gold price remains near historic highs, as a result of investors seeking safety from more volatile assets, prices will likely remain "range-bound" in the short term.

The precious metal has largely hovered around the $920/oz to $965/oz range over the last three months, although it was a bit stronger on Wednesday afternoon, at $977/oz, buoyed by weaker equity markets and economic concerns.

Of course, waves of loss of confidence in the economy or weakening of the dollar will continue to send investors scuttling back to the safety of gold, which seemed to be the case on Wednesday.

“But we don't expect it to move around much from where it's currently been trading, until 'the next new thing' happens,” Fitch Ratings director Monica Bonar said in an interview from New York.

“And that could be until markets recover enough that people really start saying: 'Why have I got stuck in gold bars when I can capture upside in the debt market, or the equity market, or the housing market?'.”

While gold exchange-traded funds saw record inflows during the first quarter of the year, activity has since slowed, with the funds themselves reporting flat and even sometimes slightly lower gold holdings.

“It does looks like investors are already nipping at other asset classes,” Bonar commented.

And if the inflation expectations that have helped underpin investment demand for gold wane in the short term, this would also back the case for a 'pause' in overall demand.

In the longer term, Fitch views investment demand as robust and expects that it should support relatively high prices over an extended period, “first supported by a flight to quality, then as a currency hedge and finally, when the cycle turns, as a store of wealth in the emerging markets”, according to the report published on Wednesday.

As can be expected in a high-price environment, jewellery and industrial gold demand remain subdued, and are expected to stay that way through the down cycle.

On the supply side, the stronger gold prices seen this year have resulted in high levels of scrap coming onto the market, particularly in the first quarter.

Most of the 'distressed' selling of gold in so-called Western markets (Europe and North America) has likely peaked by now, while consumers in Asian, the Middle East and Latin America, or emerging markets, will probably remain price sensitive - selling scrap when prices appear high in local currency and buying jewelry, coins or bars when prices are below expectations, Bonar said.

From a supply point of view, central bank gold sales are not expected to play any role at all.

“So, it's really a question of, will the people with money in gold leave it there, on the western side, or, on the eastern side, will there be more people selling at high prices?” she commented.

Another aspect to consider is that any improvements in global economies and financial markets would likely be accompanied by strong growth in emerging economies.

This means that the potential decline in investment demand, as less risk-averse investors move their money into other asset classes, would probably be partly offset by higher physical demand from emerging market consumers, who are in a better position to accumulate gold.

The precious metal traded as low as $250/oz in early 2001, but was catapulted to an all-time peak of $1 030,80/oz in March last year, as investors sought safe haven from riskier assets. The gold price ventured back into four-digit territory again in February this year, before declining again.

http://www.miningweekly.com/article/gold-likely-range-bound-in-short-term-fitch-2009-09-02

 

3 September 09

Gold $990

Way to go fitch for failing inside 24 hours.

 

Precisely because gold is not supposed to be rising here and no one expects to keep going, this could be that time the Bear Stearns high could be tested. Of course I'm just speculating here

 

holy moly..........things getting out of hand here with the yellow dawg knockin' on 1,000. Where are the precious metal bashin' broker types? Better get those bullion banks sellin' pronto! We can't have this sucker getting over a thou'.

 

$996.20 now for gold

Silver is going up huge too. Up almost a buck today. $16.18 per oz

 

If its one thing Im bullish on, its gold. However I cannot believe the hype around gold when ever it gets near 1000. Gold should be well over 1200 an ounce but it seems every time it makes a run for higher levels it backs off. Gold is going higher in my opinion, 1150-1200 by early 2010 and as high as 1500 is not out of question over the next 2 years.