Gold Poised to Break Through $1,000
Source: miningmx.com (2/23/09)
"There is a little bit of panic out there. . .Equities are setting new lows and gold is the place to run to."
Spot gold has rallied around $130 an ounce in the last month and climbed to an 11-month high of $1,005.40 on Friday, not far from the record $1,030.80 it hit in March 2008.
Prices consolidated on Monday, but the upward trend remains strong.
UBS strategist John Reade said gold buying for investment was the driver behind recent gains, even as jewelry sales lag. "We have an average forecast of $1,075 for the first half of this year, which implies we should get to a new high," said UBS strategist John Reade.
"To average that in the first half of the year, you could make a case for gold going up to $1,200, perhaps more," he said. "(Investment demand is) the only thing in the market at the moment."
Investment in gold-backed exchange traded funds (ETFs) has soared as investors buy gold as an alternative to more volatile assets. Holdings of the largest gold ETF, New York's SPDR Gold Trust, have risen almost 250 tonnes since Jan. 1, versus around 3 tonnes in the same period of 2008.
ETFs issue securities backed by physical bullion, giving investors exposure to the underlying price of gold without taking delivery of the asset itself.
Gold's appeal as a haven means it is likely to further outperform other assets such as equities and oil, analysts say.
While industrial commodities are suffering from falling demand as the recession bites and equity markets are wilting in the face of banking sector volatility and a spate of worrying corporate results, gold has shone.
According to Reuters data, its ratio versus the S&P 500 index hit its highest level since 1990 last week at 1.3, and against oil its highest since 1998 at 26.0.
"There is a little bit of panic out there," said Robert MacIntosh, chief economist at Eaton Vance. "Equities are setting new lows and gold is the place to run to."