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Bank revises gold target to $1,050 Posted: Wed, 07 Nov 2007 [miningmx.com] -- A FEATURE of Harmony Gold’s September quarter results was that the general improvement in operating performance was despite continued operating losses at the firm’s “marginal mines” – which tend to be older, less profitable mines. David Davis, a gold analyst at Credit Suisse Standard Securities, says the worsening in performance of Harmony’s weaker assets is to be expected of gold mining companies globally. Notwithstanding the improvement in the gold price – up 19% in US dollar terms over the past six months – costs are killing marginal mines. “We believe our forecast decline in global production will be aggravated by an increase in costs, which will impact on the marginal mines forcing premature closure,” says Davis. He was commenting in a Credit Suisse report in which he increased his forecast average for the gold price to $1,050/oz by 2010. It was Davis who wrote (more than two years ago) that the gold price would be around $700/oz by year-end 2008. At the time the gold price had staged a promising recovery from a low of $255/oz to around $430/oz. But nobody expected the metal to record its current prices – not even Davis himself, who proved too conservative. But we should take him seriously. He also believes the gold price will be through $800/oz by the new year, having now attracted safe-haven status amid a 35% increase in the oil price and a weakening US dollar. “We believe the US dollar and the oil price have become key drivers for gold in the current environment,” says Davis. “The oil price is currently hovering at record levels, and analysts believe it’s likely to break through $100/barrel in the near future.” The outcome is that higher oil prices will result in inflationary pressures that will result, in turn, in upward pressure on the gold price, mainly because gold is used as an inflation hedge. Click Here to subscribe to our daily newsletter
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