Posted on 12/16/2005 10:00:54 AM PST by DebtAndDelusion
LONDON: Heavy demand for gold from Russia, China, India, the Middle East and possibly the United States is likely to push the price up to a record high of $650 an ounce by the end of 2006.
In the United States, where demand for gold is about half that of Europe, concern about the impact of the changeover at the millennium boosted gold demand in 1999, and fear could at some time be a factor again, Frank Holmes, chief executive of US Global Investors, said this week.
"If fear takes hold the price of gold could jump faster than people are expecting," he said.
Historically the highest price for spot gold was seen in 1980 at $850 an ounce and recently Japanese demand has pushed prices up over $540 an ounce, a rise of nearly 24 percent so far this year.
Most of the demand has come from fund managers looking to diversify their portfolios into precious metals which have little or no correlation to stocks and bonds and central banks swapping dollar reserves for gold. Emerging market consumers are also buying more gold jewellery.
"Emerging markets are driving up the price of gold," Holmes said.
Holmes's fund invests in gold miners. It has around $1 billion under management and in the 12 months to September it returned nearly 20pc.
"The supply coming out of gold mines has been falling for the past couple of years and will continue to fall to the end of the decade. The birthing process to bring new supply on stream can take 10 to 15 years."
The prospect of some central banks raising the proportion of gold they hold in their reserves is also on the agenda and adding to the atmosphere of gold fever in the market.
Last month Russian President Vladimir Putin called on the central bank to gradually raise gold reserves. Russia currently holds around 386 tonnes or 12.4 million troy ounces of gold.
"That triggered a rise above $500 an ounce," Holmes said.
"Prior to that there was China, which we know is aiming to turn 2.4pc of its foreign currency reserves into gold."
UK-based consultancy GFMS expects total world demand for gold to rise 7pc this year to 3,383 tonnes.
It sees the fastest pace of demand growth in India - 26pc to 881 tonnes in 2005 from 702 tonnes in 2004.
"The Middle East is also recycling some of its trillions of petrodollars into gold."
GFMS expects a six percent rise in gold demand to 679 tonnes compared with 641 tonnes in 2004 in the Middle East.
But Holmes thinks that a trigger for another lurch higher, towards $650 an ounce could be a sharp rise in demand from consumers in the United States.
"Americans become gold buyers out of fear. In 1999 everyone was worried that at the turn of the millennium everything would fall out of the sky. Americans bought 2 million ounces of gold eagle (coins) that year," he said. US demand for gold is likely to rise just 1pc this year to 251 tonnes and European demand to fall 6pc to 533 tonnes, according to GFMS.
Investment facts
Alpacas have been called "the world's finest livestock investment." It is difficult to compare alpacas with other investments as pure investments. How much is peace of mind worth? Unlike the stock market, alpacas are depreciable over five years, giving the investor an immediate investment return in tax savings while the herd is growing.
I thought this was priceless.
Source: http://www.ilovealpacas.com
With all this information, I have come up with a winner: I am going to mint some gold alpacas. Win-win!
having a large chunk of gold would be good for security reasons, but i wouldnt put my entire assets in it. if inflation gets out of control it would be nice to own a little bit of gold.
At least Element 79 isn't subject to the discombobulation that Element 187 would be. None of that half-life crap!
;^)
Is that Swiss America's markup...to $550/oz? Gold is down below $500 today.
Gold will continue to decline as the economy improves. Then maybe Michael Savage will stop reading those ads.
"Gold will continue to decline as the economy improves. Then maybe Michael Savage will stop reading those ads."
And start reading the "learn why world bankers are conspiring to hold down the price of gold!" ads instead.
And here I was thinking that chinchillas were the next great thing in livestock investment...:-)
Well they could be, but keep in mind it will be difficult to compare chinchillas and alpacas. Some investments pay dividends and returns and others, like alpacas, pay off in other, less measurable ways. Don't let this discourage you though. As per the web site, alpacas are depreciable over the first five years (while you're building your herd) which can result in significant tax savings.....can you believe this manure?
That's a fair question Mr Balrog, a fair question indeed.
I've been hearing and thinking about gold my entire life. I used to talk about it down at the coffee shop with my friends but most of them have died now. Then I got this computer and learned about the Internet and now I think I'll talk about it here.
It was the Great Depression that showed me how important it is to have some gold. If Father hadn't had his gold from France I think we would have starved. I've probably carried on enough about how Roosevelt stole our gold but once you've seen it you realize government will break all the rules when they get in a jam.
I don't know if I believe all these stories about the manipulation of the gold price or not. I mean, how can anybody sell paper gold? You know that old saying, "He who sells what isn't his'n, buys it back or goes to prison."
What are all these short sellers going to do when delivery must be made? Sure, the price is down because margin requirements have been increased (like they did to the Hunt brothers in 1980 with silver) but that's manipulating the price down.
Oh, that's what they mean.
People selling gold they don't own. Now that's a laugh -- and I thought I had seen everything. Question is -- who are the fools -- those a-buyin' or those a-sellin'?
We will know soon enough.
HG
Relax. Wishing is not a productive strategy. Instead, do a little research and explore the opportunities where they are today! Still plenty of time to make money.
There is always manipulation in the gold market. The overall market is small, and the major players are central banks and the miners themselves, for gosh sake! But that doesn't mean you can't make intelligent choices and manage risk and take advantage of an unusual situation. A lot of people have left a lot of money on the gold table because they were too smart to go with the trend when it was obvious.
I disagree. Classical economics, supply and demand. The author also left out new investment products that buy gold bullion. Investors are buying it up in the US.
On the other hand the Eagles are legal tender. When (if ever) fiat money goes haywire you can still transact in dollar denomiated currency with American coins.
That $50 Eagle might buy a month's worth of grocieries . . . or a rifle with one thousand rounds of ammunition.
There's plenty of gold in the ground and in reserves.
I figure one should hold a percentage equal to the probability of total chaos and economic collapse in the next say, two years.
Oddly, the legal tender value of the Eagle coins is not linear throughout the various sizes.
"OK, all true, but I still wish I would have bought some gold about 5 years ago."
If you bought Wheaton River four years ago at $0.50 you would be very well off now.
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