GOLD To Rise To $800 An Ounce, Says J. P. Morgan
How high will the price of GOLD rise before YOU consider buying some?
GOLD To Hit $800: J. P. Morgan
By ROMA LUCIW
Tuesday, January 31, 2006 | Posted at 4:51 PM EST
Globe and Mail Update
JP Morgan Chase & Co. said the price of gold could surge to $800 (U.S.) an ounce in the next two years, as central banks curb their selling of the metal.
The forecast came as gold shot to a 25-year high Tuesday, with investors piling into the precious metal as a refuge from escalating concerns over Iran's nuclear program. The JPMorgan analysts said gold will rise to $600 an ounce by the end of 2006.
“While we expect gold prices to be increasingly volatile, we believe that the primary risk is to the upside, and our commodity group has already pointed to the potential for slowing Central Bank sales to drive gold higher towards $800 an ounce,” JPMorgan Chase analyst John Bergtheil wrote in a note to clients.
The JPMorgan team cited falling supplies, strong demand from India, the deregulation of China's gold market, market uncertainty in the wake of the retirement of long-time U.S. Federal Reserve chairman Alan Greenspan, a gold market that has room to grow and the risk of a terrorist attack, among others, as factors that will keep gold prices elevated.
Chinese demand could spike this year as the number of weddings are likely to “rise significantly in the lucky year of the dog” that began on January 29, 2006, the report said.
In a distinctly less bullish call, UBS Securities analysts in Toronto are calling for gold to closed 2006 at $560 an ounce, and 2007 at $600 an ounce.
Geopolitical worries, combined with Tuesday's widely-expected U.S. interest rate hike, sent gold futures for April delivery up $3.50 to $574.10 an ounce on the Comex division of the New York Mercantile Exchange. Earlier it traded as high as $575.10, the highest price since January, 1981.
Gold has been flirting with 25-year highs for several months now, a run that shows no sign of slowing down.
Silver futures for March delivery gained 11.5 cents to $9.89 an ounce on the Comex. It hit an intraday high of $9.915 an ounce, a level not seen since April, 1984. Silver prices have risen 40 per cent in the past 12 months and 11 per cent this month.
Tensions between Iran and the U.S. and Europe have provided the latest boost to gold prices. Iran edged closer to a run-in with the United Nations' Security Council, with the U.S., the U.K., France, Russia and China all agreed that the United Nations Security Council should consider Iran's situation at a Feb. 2 meeting of the International Atomic Energy Agency.
Iran, the world's fourth-biggest oil producer, denies U.S. assertions that it is gearing up to create nuclear weapons, arguing that its research is solely aimed at generating energy for civilian purposes.
Iran and the European Union are scheduled to resume talks on the nuclear program in Brussels today.
The Fed, meanwhile, raised its key interest-rate target by another a quarter basis point to 4.5 per cent on Tuesday, its 14th straight increase. It is was expected to be one of the last U.S. interest rate hikes, a move that could undermine the greenback and make gold — priced in U.S. dollars — even more attractive to overseas buyers. The Fed, however, signalled Tuesday that further rate hikes could be necessary to keep inflation at bay.
Gold, which tends to trade inversely to the U.S. dollar, often rises in times of economic or geopolitical uncertainty. Investors have traditionally seen the precious metal seen as a safe haven in times of crisis.
In addition to Iran-related concern, the unexpected election of a majority Hamas government in last week's Palestinian elections also boosted demand for gold.
Increased demand for the metal — particularly from jewellery makers in India and China — as well as speculative demand from investors, and persistent worry that soaring energy costs will stir inflation in the world's largest economies, have contributed to gold's rally.
The gold sector was the biggest gainer on the S&P/TSX composite index Tuesday. Agnico-Eagle Mines Ltd. had the biggest rise, climbing $1.96 (Canadian) or 7.25 per cent to $28.98, its highest level in at least five years.
© 2006 Kentroversy Papers
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The following sources were used in the creation of this Kentroversy Paper . . .
GOLD To Hit $800: JP Morgan (January 31, 2006 4:51pm)
KITCO: Live Market Quotes - Precious Metals
Chinese Demand For Gold
Federal Reserve Bank