Bank Analyst & Researcher Opinions
Date: October 12, 2007
Information has been redacted from the articles as
they originally appeared and some information has been bolded for
emphasis.
Goldman Sachs
U.S. Third Largest Securities Firm
Thompson Financial, Newstex - 09/24/07
"We believe the $50 per ounce rally since Sept. 6 has reflected both a return to fair value and at the same time an increase in fair value as the dollar has weakened substantially."... "moreover, we believe that gold continues to gain support form the structural realignment in the relationship between gold and the US dollar, driven mainly by raising consumer and central bank demand in the rapidly growing emerging market." ... "It's likely that investor demand, jewelry demand in emerging markets and additional net central bank buying from emerging markets will help to offset the dollar-related weakness in 12 months that is currently embedded in our forecast."
The investment bank has upped it's 3 month forecast to $775 from $700, and $800 per ounce over the next six months from $715.
CLSA
Investment Banking arm of Worlds Third Largest Bank
Times Online - 09/19/07
According to Christopher Wood, chief strategist at the broker CLSA, market ructions and a collapse of the dollar could send gold prices to more than $3,400 an ounce within the next 3 years...
Wood, as reported in The Times, says the scenario could be that investors will soon realize that the subprime crisis is just a currently-visible part of a much wider financial breakdown... Whether the Central Banks will sit back and let this happen is actually unlikely, but the argument is that if enough momentum is gathered the Central Banks will be unable to stop it... I certainly wouldn't rule out $1,000 gold in that period...
CLSA is an award winning brokerage, investment banking and private equity group in the Asia-Pacific markets. Founded in 1986 and headquartered in Hong Kong, CLSA's major shareholder is France's Credit Argicole, the world's 3rd largest bank by Tier One capital and 7th by assets.
Citigroup
World's Largest Bank
Financial Post - 09/21/07
John Hill of Citigroup thinks gold will be one of the top beneficiaries of the "Re-flationary Rescue," which should bode well for hard assets and basic materials...Citigroup continues to be bullish on bullion and expects the multi-year bull market to continue with prices to average $750 in 2008 and 2009. Mr. Hill says he would not be surprised if gold were to break its all-time high of US$850 or even US$1,000 or higher in a "new cycle of global credit creation and competitive currency devaluations."
Merrill Lynch
U.S. Second Largest Securities Firm
Gold and Precious Metals Weekly - 10/10/07
Merrill Lynch reports in Gold and Precious Metals weekly that "Once nearly unthinkable, bullion is now within striking distance of the all-time high of $850/oz. set in January 1980."
David Rosenberg - North American Economist - Merrill Lynch
Merrill Lynch - 4/9/07
In the April 3, 2007 edition of the Portfolio Manager's Review, David Rosenberg, Merrill Lynch North American Economist, discusses the resurrection of inflation expectations and its potential impact on gold prices. The following two paragraphs are taken from his research....
"We reiterate that gold is in a secular, not merely cyclical, bull market. Indeed, gold formed a very similar bottom formation in 1999 as the S&P 500 did back in 1982. And, if this plays out like other secular bull markets have in the past - emerging markets, bonds, stocks, oil, real estate - then this is a run that can be expected to last at least another five years and ultimately see bullion break the $1,500/oz barrier....
... if gold had merely kept pace with inflation during the past 25 years, the nominal price would have already cleared that $1,500/oz threshold. As we have already seen so far this cycle, gold has proven to be a very successful hedge against deflation ... and inflation fears (which is one reason why it is in a secular bull market)"....
UBS
World's Sixth Largest Bank
RecourseInvestor.com 10/08/07
Analysts from UBS were among the latest to issue bullish gold forecasts, raising their multi-year forecasts as high as $820 per ounce. UBS analyst John Reade notes that lower scrap supply and growing jewelry demand - as buyers have "adjusted" to $700-range-prices - is helping to support the price of gold in the longer term.
JP Morgan
U.S. Third Largest Bank
Business Standard - 06/08/07 & 10/10/07
Gold may rise to more than $1,000 an ounce as demand from India, China and exchange traded funds increases and production of precious metal falls, according to JP Morgan Chase & Co., the third-largest US bank.
Gold-mining companies reduced output to a 10-year low of 2,471 metric tons in 2006, according to London-based researcher GFMS Ltd. Demand for gold from India, the world's largest buyer, rose 50 percent in the first quarter or 2007 while demand in China gained 31 percent, according to the World Gold Council.
10/10/07 - In JP Morgan's Weekly Metals Technical Strategy they state "We remain Gold bulls and USD (US dollar) bears targeting a move towards 800 and then potentially the 850 previous highs set back in the 1980's... We are poised for an upside breakout therefore in the metals /mining stocks and in the yellow metal itself. Have faith with the bullish view while over the 719 region..."
European Central Bank
Dow Jones Newswire - 09/24/07
European Central Bank President Jean-Clause Trichet said central banks have responded properly to the current credit market crisis, but cautioned tat the ECB is continuing to closely monitor the situation.
But he warned that the current crisis needs to be monitored closely in order to be resolved in an orderly fashion. He also cautioned that there was always a risk that corrections can be excessive.
"Events of this kind always trigger turbulent episodes with a high level of volatility and could finally exceed the appropriate correction level," he said.
Credit Suisse Group
World's Eighth Largest Bank by Revenue
Bloomberg - 09/20/07
Credit Suisse Group, Switzerland's second-biggest bank, raised it's 12 month forecast for gold, silver and other precious metals because of supply shortfalls and a decline in the value of the dollar. Gold may trade at $730 to $770 an ounce, from a previous forecast of $670 to $720, according to a report yesterday by Tobias Merath, head of commodity research.
Martin Murenbeeld
Mining Mx - 09/26/07
GOLD guru Martin Murenbeeld is predicting an average gold price of $823/oz for 2008 as positive market fundamentals bear out his earlier, bullish forecasts.
Speaking at the Denver Gold Forum, Murenbeeld also forecast gold would average $683 for 2007 and end the year at $754.
Murenbeeld assesses the gold market through econometric models which set out three price scenarios out of which he derives a "probability-weighted" forecast. His predictions have been remarkably accurate over the past four years.
At the 2006 Denver Gold Forum, Murenbeeld predicted an average price of $605 for 2006 (actual average price: $604); a gold price of $646 at end-2006 ($636) and an average of $679 for 2007. The actual average gold price for 2007 to date is $664.
Murenbeeld pointed out that if the gold price maintains $720 until the end of the year, then the average price for 2007 will be $679.
Murenbeeld presented the same eight reasons to be bullish on gold that he had highlighted a year previously... Top of the list is that the monetary reflation he predicted last year is now "at hand" while the dollar "has broken down and must decline further."...
Turning to world foreign exchange markets, Murenbeeld said foreign reserves of US dollars had exploded to $5 trillion with China alone holding an "obscene" level of $1.3 trillion.
He believed this would result in a shift from dollar reserves with some of those funds being diverted into gold.... "The rising oil price enriches a small group of people who have a penchant for buying gold...."
Turning to gold supply, Murenbeeld said his model suggests that western world gold output will decline. He was not worried about central bank sales of gold....
Murenbeeld also pointed out the shortest cycle in the gold market for either up or down legs had lasted 10 years. "We are about six and a half years into the current up cycle and I must also point out that, in all these cycles, there can be a year where the gold price takes a setback. But that does not mean the cycle is over."
Murenbeeld outlined two bearish issues. Should there be an economic recession then demand for commodities would fall and gold often suffered as well... monetary authorities could focus more on controlling inflation and hike interest rates which would be bad for gold. ...
Scott Wright - Analyst - Zeal LLC.
MarketWatch - 09/20/07
After reaching their highest level since 1980, gold prices may be due for a correction soon, but that could help feed what many expect to be a long-term boom -- to $800 and then inflation-adjusted highs past $2,000 in the years to come....
"I do not believe today's prices are lofty," said Scott Wright, an analyst at financial-services company Zeal LLC. "Gold would have to exceed $2,200 an ounce in today's dollars to match the all-time real high achieved in 1980."
Still, gold futures have jumped around 16% after ending last year around $640. They climbed 11% in just the last month alone.
"Demand is continuing to rise and producers are continuing to struggle in bringing supply to market," said Wright. "With the dollar bordering historic lows, gold's monetary prowess is continuing to grow. [And] in the near term, we are entering into a seasonally strong time for gold."
Issue at hand
The most immediate influence on gold prices this week has been the Federal Reserve's decision Tuesday to cut its overnight interest rate target by a half percentage point to 4.75%.
With the cut, "the Fed revealed that it has no interest in defending the dollar or containing inflation," said Peter Schiff, president of Euro Pacific Capital. "This kind of irresponsibility is all gold needs to move higher from its current levels." ...
In the past, falling U.S. interest rates have been bearish for metals, said Michael Widmer, a metals analyst at Calyon, in recent research note. ... In the end, it would take a "change in attitude from the investment side of the market" to send gold prices significantly lower, said Darin Newsom, an analyst at DTN.
The Fed's actions this week provides "confirmation of the weakness of the Federal Reserve, and makes $1,400+ gold like shooting fish in a barrel," Schmidt said.
Also, "the price of gold is on trends established by two decades of inept monetary policy in the U.S. -- such long-term trends are not easily reversed," he said.
Rewarding risks
For now, be warned of rough waters ahead for the gold market. But those who stick out may be finely rewarded....
Don't expect any major shake out in prices until you see gold test the $800 resistance level, said Ralph Preston III, an account executive at San Diego-based Heritage West Financial Inc.
But you won't have to wait long. "Shear momentum and the perception that the Fed will abandon the buck as it flirts with its all-time low ... will propel gold to $800 by the end of the year," he said.
O'Byrne said the most likely scenario for gold would be a retest of support at $700 in the short term before challenging $800 before the end of 2007, and the record non-inflation high of $875 reached on Jan. 21, 1980, early in 2008.
Peter Grandich, editor of the Grandich Letter, said gold would see a steady rise in stages, with the next stage trading anywhere between $735 and the old high around $875.
And analysts are already talking about what's beyond that.
Gold may reach $800 this year and Euro Pacific Capital's Schiff said he believes it'll surpass $1,000 next year.
And "unless the Fed somehow finds its backbone within a year or two, then gold has a good chance to take out its inflation-adjusted high of nearly $2,000 per ounce within this decade," he said.
Levels above $2,000 would account for 27 years of dollar devaluation, said Peter Spina, an analyst at GoldSeek.com, and while that gold price level is "becoming more likely as the current situation evolves," it's likely years away.
One thing to be sure of, "years down the road $700 gold will seem cheap," said Zeal's Wright.
Stephen Leeb - Leeb Group
New York Sun - 10/11/07
Stephen Leeb is worried about inflation, but not the way you or I or Ben Bernanke worries about inflation. He views escalating prices as the inevitable consequence of an oncoming clash of civilizations.
"I'm not very bullish on the world," Mr. Leeb says, "but I hope I'm wrong."
Mr. Leeb heads up the Leeb Group, which manages money for high net worth clients and which publishes a newsletter called the Complete Investor. Since Mr. Leeb was early — too early, according to his publisher — in popping the tech bubble in 1999 in a book called "Defying the Market: Profiting in the Turbulent Post-Technology Market," and also in loading up on energy stocks a few years ago, his views are of interest. That, certainly, is the opinion of the 60,000 people who subscribe to his newsletter, and presumably the reason he has successfully published several books.
His current theme is that growth in the Third World is irreversible and that it is creating an uncontrollable inflationary spiral. He is recommending that clients buy gold or gold mining stocks, as well as other companies that benefit from a gradual tightening of resources, including food and water.
This notion follows naturally from his iconoclastic writings on the dot-com boom. "The tech boom was all about how fast computers can solve equations," Mr. Leeb says. "Who cares? The world needs more energy, and more food. How do faster computers solve these problems?"
... His new theme is that since most developing nations are politically unstable, there is no going back once the people in these countries begin to enjoy some improvement in their standard of living. Most visibly today, rising demand from countries like China and India has stretched energy supplies and pushed up oil prices. Other commodities have followed a similar path. Mr. Leeb thinks this is just the beginning.
Mr. Leeb is not optimistic that free markets will successfully balance supply and demand any time soon. In past cycles, rising consumption of copper, for instance, drove prices higher, encouraging new investments in mines, and increasing supply. In the 1970s, the rapid increase in oil prices eventually resulted in lower consumption and increased supplies, bringing prices back down. This is not going to play out again, Mr. Leeb says, as those forces were buttressed by a major American recession, an unpalatable choice today.
"There's too much debt. We can't afford a recession," he concludes. "In any case, all the conservation at that time took place in the developed world. There's no evidence that the developing world can conserve."...
His main message, however, is that investors should buy gold. In his most recent newsletter, he lays out the history of gold as an inflation hedge. He argues that gold performs best when inflation is accelerating. The rapid rise in commodities prices in recent years almost surely will lead to increasing inflation as they work through the production process. Mr. Leeb compares the current decade to the 1970s, when gold prices increased 33% a year. The early 1970s saw a sharp increase in commodities prices, a pause, and then another increase. Recently, we have seen a similar pattern.
As oil prices strengthened earlier this year, inflation expectations increased. The Federal Reserve, which had appeared ready to put the brakes on the economy to slow the upward creep of prices, instead has had to lower rates to avert a meltdown in the capital markets, all but ensuring a renewal of inflation.
Mr. Leeb would advocate that investors put as much as 10% of their holdings into gold, either through ETFs or through the purchase of mining shares. Singled out in his newsletter are streetTracks Gold Shares (GLD $73), and mining stocks Barrick Gold (ABX $42) or Kinross Gold (KGC $16).
...Otherwise, Mr. Leeb finds few investments that will do well in a period of rising inflation. "If you asked most Americans which was the worst decade for investing, they would say the 1930s. They would be wrong. The worst decade was the 1970s, when high inflation caused negative returns on stocks, bonds, and even cash. In terms of purchasing power, between 1965 and 1980, a $100,000 bond investment dropped in value to $43,000."
So how has Mr. Leeb done as an investor? He claims that his firm has ranked in the top third percentile of large cap growth managers since its inception in early 1999. Over that period, returns have averaged 6.9% net of fees, compared to 3.6% for the S&P 500 and a loss of 1.5% for the Russell 1000 Growth index....
Christopher Wood - Chief Strategist - CLSA
Mineweb - 09/19/07
A short article in today's Times newspaper in the UK recounts that Christopher Wood, chief strategist at big Hong Kong broker CLSA (whose largest shareholder is France's Credit Agricole, the world's 7th largest bank by asset value) feels that "market ructions and a collapse of the dollar could send gold prices to $3,400 an ounce or more in the next three years."
Is this just a euphoric statement by someone carried away as the gold price strengthens above the $700 mark, or worthy of serious consideration?
Somewhat frighteningly, perhaps the ‘serious consideration' scenario definitely wins out here. $3,400 an ounce is a little less than five times the current gold price level - and price gains of this magnitude have been seen in the base metals and uranium sector over the past three to four years.
Admittedly gold is a different animal from the industrial metals where prices have risen on unprecedented demand from countries like China, which had not been predicted and caught the mining sector short. But, Wood argues, as reported in The Times, the scenario could be that investors will soon realise that the subprime crisis is just a currently-visible part of a much wider financial breakdown.... Whether the Central Banks will sit back and let this happen is actually unlikely, but the argument is that if enough momentum is gathered the Central Banks will be unable to stop it. ... I certainly wouldn't rule out $1,000 gold in that period. Plenty of far more experienced observers than myself would agree with this - not least Pierre Lassonde, former President of Newmont.
Curtis Hesler - Editor - The Professional Timing Service
Forbes - 09/13/07.
The price of gold has boasted a nice-sized climb over the last few years. Since hitting a low in April 2000 of $255, the price of gold has jumped 178% to $711, where it traded Wednesday in New York.
The explanation for the renewed interest by investors in gold can be traced back to reasons fundamental and even psychological, according to those who study the much-desired metal.
Curtis Hesler, publisher of Professional Timing Service, a newsletter covering investments in hard-asset plays like energy and gold, said investors are increasingly attracted to gold because of weakness in the dollar.
"On the fundamental aspects, this does have a lot to do with the weak dollar," Hesler said. "A weak dollar is good for gold. If I were to diversify out of dollars, because I have too many, what should I do? I could buy assets. Or diversify into other currencies. But I could also diversify into gold because it's international money."
Another motivation for traders to buy up gold is the expectation of a Fed rate cut. Gold is used as a hedge against a weak dollar and inflation, both of which are caused by lower U.S. interest rates.
When rates go down, it's a better time to own hard assets, said Thomas Winmill, who has served as the portfolio manager of Midas Fund (MIDSX) since 2002.
"If the inflation rate is at 3% and the interest rate is at 3%, then you have no real return to having money in a checking account," Winmill said. "You want to borrow money and own tangible assets like gold and real estate that can appreciate in value."...
"Gold is a way to preserve wealth," he adds. "So when the world goes to hell, people go to gold. Why not own something solid you can put in your vault?"
Hesler agrees. "In the first quarter of next year, we could see gold push the $800 level," he said. "Longer term, I see a doubling from there by the end of the decade. I expect the dollar to get extremely weak."...
Henrik Gullenberg - Currency Strategist - Calyon Corporate and Investment Bank, London
FutureSuorce.com - 09/11/07
And Henrik Gullberg, currency strategist at Calyon Corporate and Investment Bank in London, says that the dollar might yet strengthen if a weak U.S. economy is not contained within the 50 states, and translates into a global slowdown.
"If you have a weak U.S. economy, a possible recession, that spills over and causes negative global implications, then you have risk aversion that would help the dollar," Gullberg said.
And that possible interest in the greenback could turn investors off on gold.
Jim Sinclair - MineSet
MineSet - 08/09/07
Adding financial liquidity to the marketplace is happening both in Europe and in the US even though it's being denied. This is nothing less than MONETARY INFLATION which by economic law translates into price inflation. Adding liquidity is like pouring gasoline on a bonfire. It is proof that central banks will burn down the barn to avoid a derivative crisis. The barn is their respective currencies....
Believe it or not, today's circumstances are what it takes to propel the price of gold above $1,650....
When the dust clears, fundamentals will dawn on major investors which will take gold to and through all the angels. All you are seeing today is madmen and women going broke and building the major platform for a major up move in gold.
Pierre Lassonde - President - Newmont Mining Corp.
Merrill Lynch Industry Overview - 08/06/07
Pierre Lassonde made the opening address at the 15th Diggers and Dealers conference and gave a bullish presentation. His view is this super cycle will last a generation (i.e. 20 years). He predicts that gold price will reach 4 figures, i.e. at least US$1000/oz in the coming years, as the US$ continues to weaken (especially against the Chinese RMB), robust jewellery and investment demand continues backed by reducing gold supply and lack of exploration success....
Duration of the last super cycle was 14 years, 1966-80, and base metal prices peaked before gold and oil.... So far, gold has risen from US$250/oz to US$675/oz which is up 170% so far...we are heading back to the future....
Gold production has been coming down 1% pa for the last 10 years and will not improve for at least the next 5 years....
Gold as a currency - the current account deficit in the US is now over 6% of GDP. PL believes that the US$ will continue to go down and the dollar is ready to crack downwards. When this happens gold will rise substantially over the next 2 years.
Inflation on the rise - PL states there is a tsunami of liquidity washing over the world which is increasing inflation. There are excessive US$ reserves in Asia and inflationary pressures are good for gold....
PL believes this cycle will last 20 years. Yes, there will be corrections but they will not stop growing in China and India....
In 1966, the DOW was 984 and gold US$35/oz for ratio of 28 to 1. In 1980 when gold spiked, the ratio got to 1:1. The current ratio is around 20:1 with the DOW 13,000 and gold US$675/oz. Looking at excess liquidity and US$ pressures PL believes that gold will continue to rise. The DOW to gold ratio will be 2:1 and gold will reach 4 figures - i.e. >US$1000/oz in the coming years....
Stephen Malyon - Currency Strategy - Scotia Capitol
FutureSource.com - 09/11/07
The dollar is starting to resemble fool's gold for investors wanting a safe place in troubled times, and that's leading shelter-seekers to just buy the real thing.
The price for gold - the ultimate security blanket since the Egyptians began mining for its thousands of years ago - has been surging in recent days as worries of a slowdown in the U.S. economy and the global short-term liquidity crunch continue to rattle stock markets....
"The dollar appears to have lost its safe-haven allure, allowing gold to benefit from a rise in risk aversion and weakness in equities," said Stephen Malyon, currency strategist at Scotia Capital in Toronto....
But now that the U.S. housing and subprime-mortgage related debacle is starting to spread to the broader economy - as seen by a report Friday showing a drop in job creation for the first time in four years - the dollar doesn't look so hot.
Making matters worse for the dollar and perhaps good for gold, any action by the Federal Reserve to turn things around - interest rate cuts or cash injections into the financial system to keep markets flush with liquidity - will also turn investors away from the dollar.
Lower interest rates would mean investors get paid less for holding dollar-based assets, so many would likely turn to other currencies that pay higher returns.
And cash injections by the Fed is inflationary by nature, which also tends to make the dollar less attractive because investors' buying power diminishes with each passing day.
Ashraf Laidi - Chief Foreign Exchange Strategist - CMC Markets, NY
FutureSource.com - 08/11/07
Gold, meanwhile, is seen as the perfect hedge against inflation. "There is an increasing clarity about the weakness in the U.S. economy, so it is becoming a logical conclusion for people to put their money in gold," said Ashraf Laidi, chief foreign exchange strategist at CMC Markets in New York.
Ambrose Evans-Pritchard - International Business Editor - London Telegraph
FMNN (Free-Market News Network, Corp.) - 08/13/07
Ambrose Evans-Pritchard, International Business Editor of the UK's The Telegraph, predicts gold will exceed $2,000 per ounce, stating:
"Gold will fly once investors can see that neither of the two reserve currency pillars (euro and dollar) is on a sound foundation, and once the pair are engaged in a beggar-thy-neighbor devaluation contest to stave off a slump...
"We are not there yet. Timing is not my forté, but 2008 looks ripe....
Could gold reach a price of $5,000 the ounce by 2010? Citing the tendency of the Dow Jones and Gold to occasionally trade at a ratio of 2:1,McEwen Capital Insite Publication says:
...We believe this ratio will once again be 2:1. If this is correct and the Dow stays relatively flat, we could experience a gold ratio price of US$5,500 per ounce."
Alan Greenspan - Former Chairman - Federal Reserve
FutureSource.com - 09/11/07
...But some of the big brains in global economics in modern times still sing gold's praises.
While Alan Greenspan was the Fed chief in 1999, he argued against calls by U.S. legislators to get rid of the U.S. Treasury's gold holdings.
"Fiat money paper in extremis is accepted by nobody, and gold is always accepted and is the ultimate means of payment," the former Fed chairman said on Capitol Hill. "Gold still represents the ultimate form of payment in the world."
Making the shiny nuggets even more popular for today's investor is the convenience with which it can be bought and sold....
Mary & Pamela Aden - The Aden Forecast
MarketWatch - 06/18/07
The gold market has been under pressure lately and some investors are feeling a little nervous. But the major trend is clearly up. That being the case, let's stand back and look at the facts...
Gold has been rising for over six years and it's gained 158% since then. That works out to 26% per annum, which has consistently been better than most other markets.... We continue to believe that gold will likely rise for years to come, eventually reaching at least $2,000 and it'll probably go even higher.
Why?...
Essentially, the perfect storm is gathering....
Number one on our list is the global boom and wealth shift....
China, for instance, has been buying up a large share of the world's steel, lead, tin, cement, aluminum and other raw materials to build its infrastructure. Commodity imports are soaring and China is the world's second largest oil importer.
All of this demand has been the key factor driving the commodity markets higher in recent years and there's no end in sight. This is also coinciding with the mega commodity cycle, which has been quite consistent for over 200 years....
This demand factor is very important, especially combined with the limited commodity supply....
Spending, money and inflation are the other three big factors we've often discussed and they are equally important. In fact, that's really what this long-term bull market in gold is all about and it's the essence of the perfect storm.
The U.S. is the world's largest debtor nation....
...the government simply creates money and it's been creating piles of money. Interest payments on the debt alone are about $200 billion annually....
Inflation is the direct result of excessive money creation....
This will also make the dollar worth less....
It's also important to understand what happened in the 1970s and why this will continue to affect you.
Briefly, from that point on and by presidential decree, the dollar was no longer backed by gold....
The dollar became a paper currency... Throughout history, no paper currency has ever survived....
Gold, on the other hand, has stood the test of time. It has a 5,000 year track record and it's valuable. It always has been, and it always will be.
Gold is real money and it has maintained its purchasing power over the centuries. And as the dollar continues to slide, and spending and money creation continue on their merry way, gold will be the ultimate beneficiary....
So bumps in the road shouldn't sway you. Gold is in a mega trend based on fundamental factors that are not going away any time soon. So again, stay invested and we feel strongly that you'll be glad you did.
Babu Das Augustine - Banking Editor - Gulf News
Seeking Alpha - 10/08/07
The Federal Reserve Dollar may be in for another big punch. Gulfnews banking editor Babu Das Augustine has raised the possibility that OPEC may switch from dollars to another currency, furthermore reducing the demand for the Dollar which gets shunned by more and more oil producing countries. Iran only accepts Euros or Yen and Venezuela dumped the greenback while countries in the gulf region move their funds away from it too.
According to Das Augustine:
Asset diversification by the Gulf sovereign wealth funds and the possibility that the Organisation of Petroleum Exporting Countries [OPEC] will change the pricing of oil from the dollar to another currency could mean more trouble for the dollar.
Quatar and Vietnam announced only a few days ago that they were shifting away from the ailing greenback as well.
Analysts see the admission by Qatar as a signal that regional state-owned funds are moving away from the dollar.
Qatar has admitted that its investment fund has been diversifying their portfolios to compensate for the decline of the dollar. It would be naive to think that other Gulf funds are loyal to the dollar at the cost of heavy portfolio losses," said a Dubai-based investment banker...
Although gulf central banks have been discussing asset diversification in the past two years, there hasn't been any evidence of a major shift. The size of assets held by Gulf central banks are relatively small compared to the funds managed by the state-owned investment funds.
According to IMF estimates, global investment funds managed by governments control an estimated $2.5 trillion, outstripping hedge funds. Morgan Stanley estimates these assets could rise to $12 trillion by 2015, roughly the size of the US economy. Gulf countries account for a major share of these funds.
Currency market analysts believe that the gulf sovereign funds' gradual move away from the dollar is a precursor to OPEC opting for a different currency in which to price oil.
"If the dollar were to lose its lustre as a reserve currency this could prove disruptive to the global financial system," Merrill Lynch said in a research note.
"Pricing oil in dollars might have made sense when there was a paucity of other relatively stable currencies and when the Middle East imported more from the US - but not any-more," said an analyst.
I guess it is safe to say that the exodus from the first completely unbacked reserve currency in the world's history has begun - and will not stop. A strong reason for this is the fact that the USA has very little to offer in terms of sought-after export goods besides weapons, aircraft and gas guzzling oversize cars whose low MPG ratios can only be afforded by oil producing countries anymore.
Anybody counter my bet that another fiat currency experiment will be coming to an end in the next decade?
Before you lose your money, remember that ALL fiat currencies of the past 350 years have returned to their intrinsic value. Gold has NEVER lost its value in the past 3,500 years!
Peter Hambro - Founder - Peter Hambro Mining
Telegraph.co,uk - 09/25/07
Peter Hambro, the founder of the second-largest gold producer in Russia, has said that as long as turmoil remains in global financial markets there is nothing to stop gold revisiting its record high.
Mr Hambro said: "There is so much uncertainty around and if you're looking for a basic store of value what else do you choose? All currencies seem to be in a degree of flux. The only thing that is constant is gold."
Fears about the health of the global economy helped drive gold prices to a 27-year high of $737 an ounce last week.
Mr Hambro said until there was more clarity in the markets, he "can't see that gold can do anything but go up".
He added: "It is about how much currencies will devalue against gold. The dollar will probably fall further - so gold could reach the record high levels of 1970s - of $850 an ounce."
A mix of a collapsing dollar and fears that central banks are not fighting inflation as hard as they should has propelled the yellow metal higher. Today it traded at $735.15 in London, while the dollar fell to a new record low against the euro...
...The group has seen turnover increase around 58pc in the six months to the end of June, thanks to a 14pc rise in average gold sales prices to $652 an ounce, up from an average of $573 an ounce in the same period in 2006.
More importantly, said Mr Hambro, the group has pushed production up by 24pc to 134,300 ounces, up from 108,363 ounces in the first six months of the previous year.
Peter Hambro, the biggest pure gold play listed on the London Stock Exchange, said the strong rouble has helped cut costs at its Pokrovskiy mine, where it recorded a reduction in operating costs and production costs, down 14pc and 1pc respectively.
The group, which has offices in London, Moscow and Blagoveschensk, said production at the mine was up 25pc.
It also revealed that its second mine, Pioneer, was commissioned on schedule this month.
Mr Hambro added: "International financial markets have not enjoyed a peaceful summer and the board decided that, to ensure continued availability of financing for investment, it would be wise to secure a working capital facility. I am pleased to report that the group is in the final stage of negotiation of a $50m facility."
The group reported pre-tax profits of £31.8m, up from £18.2m in the same period last year.
Information has been redacted from the articles as they originally appeared and some information has been bolded for emphasis.
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