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Gold Miner Sees Higher Prices Ahead

Release Date: 
Monday, June 13, 2011

The price of gold has not yet peaked and the emergence of a wealthy Chinese middle class may help raise prices to $2,000 per ounce over the next five years, said Richard O'Brien, chief executive officer of Newmont Mining Corp., the world's second largest gold producer. O'Brien said global gold demand and supply conditions will ensure that gold's price remains robust over time, with a weak U.S. dollar set to persist as Congress shows no sign of reining in the country's budgetary woes.

Demand from both China and India for gold as both jewelry and as an investment is set to be strong, he said, adding that central banks are also starting to buy gold again. "I'm a firm believer that the gold price has not reached its peak, but it will remain volatile," O'Brien said. "Five years from now, $2,000 gold will probably be in reach."

Analysts at KEB Futures and TheBullionDesk.com and Credit Suisse also provided their long-term outlooks for gold. "Europe's debt crisis remains a long-term headache and we continue to believe that gold has to move much higher from the current level," said Hwang Il Doo, a Seoul-based senior trader at KEB Futures Co.

"Weaker commodities and equity sentiment" is pressuring precious metals, James Moore, an analyst at TheBullionDesk.com in London, said today in a report. Still, "the mix of safe-haven diversification and negative real-interest rates continue to create a positive price environment for gold longer-term. We expect dips to still be viewed as buying opportunities."

The euro fell versus the dollar as fiscal officials struggled over the Greek debt crisis, leading to a selloff in the common currency. The cost of insuring peripheral euro zone bonds against default hit record highs on Monday. "Continued pressure on bond yields is likely to spur fresh investor interest" in gold, Credit Suisse said in a research note. "The lingering discussion about the fiscal situation across developed economies should additionally promote gold's role as a store of value," it added.

(Sources: "Newmont Mining CEO sees gold headed to $2,000," MarketWatch, June 12, 2011; "PRECIOUS-Gold falls on dollar, safe-haven status supports," Reuters, June 13, 2011; "Gold May Climb as Greek Debt Crisis Is 'Long-Term Headache,' Growth Slows," Bloomberg, June 13, 2011; "Gold May Slide as Investors Sell to Cover Losses in Commodities, Equities," Bloomberg, June 13)

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†This material has been prepared for private use. Although the information in this commentary has been obtained from sources believed to be reliable, Goldline does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice.

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