Gold: Surviving Oil and the Dollar
Source: Mineweb (8/12/08)
The Bank Credit Analyst has come out in support of dollar gold bullion prices, which have taken a hammering since mid-July, when dollar crude oil prices hit an apparent blow off point. BCA Research says gold bullion "should soon find support, despite the setback in crude oil prices and a steadier dollar"
BCA Research argues that "several factors suggest that gold should soon find support and begin to edge higher in both absolute terms and relative to oil. Specifically, the setback in crude prices will help to alleviate inflation angst at the major central banks".
This, coupled with rising economic pressure on the European Central Bank and the Bank of England to abandon their hawkish stance may, argues BCA Research, "bring lower European real interest rates, which is bullish for gold by increasing the supply of fiat money".
BCA Research also states that demand for gold bullion exchange traded funds (ETFs), which offer proxies for investment in physical gold bullion, "is recovering after a brief pullback and our model indicates that the ‘fair value' of gold is in the low USD 900 an ounce zone and rising"...
The BCA Research analysis also argues that gold bullion "tends to be less sensitive to a global economic slowdown than industrial metals or energy", and that the bottom line is that gold bullion "is likely to find support around USD 850 an ounce and then edge higher. The gold/oil ratio should continue its oversold bounce over the next few months".