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Gold slide supports Barclays forecast
Allan Seccombe
Posted: Wed, 08 Feb 2006
[miningmx.com] -- THE gold price had peaked and a large correction was imminent, possibly down to between $350 and $370/oz, said Gerard Holden, MD of Barclays Capital. Holden was speaking at the Indaba Mining Conference on the day gold slipped to below $550/oz with subsequent large losses suffered by South African gold stocks.
At the time of writing, DRDGOLD and Harmony Gold were both just over 5% lower, Gold Fields was 3.5% lower, and AngloGold Ashanti had shed 2.1% on the closing prices of February 7.
However, there was potential for gold to spike, possibly by hundreds of dollars, in the event of a high profile act of terrorism, Holden said. Tension around Iran’s insistence on a nuclear programme also created political uncertainty that would support a higher gold price.
The sheer volume of speculators in the market could also drive gold through $600/oz, he
said.
“I think that could quickly translate to gold moving $200 to $300 higher. However, I do believe that we’ll see a cooling off of tensions over the next couple of months,” Holden said. “Against that background, the gold price could move back down to $375 to $350 range.”
In the base metal market, prices had enough upward momentum to keep them trending higher in the next year or two, Holden said.
Again, however, there was downside for base metals prices which had notched up record highs on the back of massive demand from China, Holden said. In the next two or three years there could be a correction in prices of metals such as copper and zinc.
“There has been an increasing interest in commodity markets by hedge funds and those people looking for yield. They’ve seen a market going through a period of very strong growth,” he said.
Base metal supplies were starting to catch up to demand as expansions were introduced amongst
producers.
The participation of fund investors in an already strong market was amplifying price improvements. If the funds decided to withdraw, there could be severe drops in prices, Holden said.
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