Murenbeeld gets more bullish

Brendan Ryan | Mon, 09 Nov 2009 11:11
[miningmx.com] -- WITH gold at record levels above $1,100/oz Martin Murenbeeld, chief economist at DundeeWealth Economics, reckons the changing attitude of central banks towards the metal is a critical driver for the price.

In his latest review, Murenbeeld also takes a swipe at New York University’s Professor Nouriel “Dr Doom” Roubini, the economist who famously predicted the global financial crisis nearly a year in advance.

According to Murenbeeld, Roubini - in an interview with Bloomberg news agency on November 4 - dismissed a gold price forecast of $2,000/oz as “utter nonsense” on the grounds that ‘there is no inflation or near depression to drive gold prices that high”.

Murenbeeld replied: “Roubini ought to be less dismissive….Putting aside the $2,000 - although I have said that gold will likely take out its all-time high $850 of January 1980 , which is $2,300 in today’s money, before this cycle has run its course -I think Roubini has it exactly wrong as do more otherwise reputable economists.

“Gold goes with money, not inflation, and depressions are awful for gold. Gold reacts to what policy makers do to get out of depressions. Gold really cannot be explained simply by looking at inflation data, and Roubini should know this.”

Turning to the purchase of 200 tonnes of gold from the International Monetary Fund (IMF) by the Reserve Bank of India, Murenbeeld said: “We’ve stressed in these reports just how much central bank attitudes towards gold have changed in recent quarters.

“The Indian purchase underscores this change in attitude and that it was India, not China, is from our perspective actually more bullish for gold. We knew China was interested in gold, having raised its reserves to 1,054t earlier.

“We weren’t quite as sure about India’s interest, even though India was one of the three countries most likely to buy the IMF’s gold.”

Murenbeeld added the Indian purchase may turn out to be a turning point in the structure of the gold market.

He said: “Economists are not good at judging such things without the luxury of time and reams of historical data. The IMF once wanted to ‘kick’ gold out of the international monetary system. Today, it is offering its gold for sale to any central bank that might be interested.

“And if gold now rises on the back of private and central bank investment, it will become increasingly difficult to explain gold’s behaviour in terms of dollar weakness, oil price strength, equity market volatility etc.”

Murenbeeld concluded that “the gold market has shifted perceptibly in the direction of scenario C – where gold was forecast to be $1,200-plus in the second half of 2010”.

Murenbeeld draws up his overall price forecast on the basis of three economic scenarios. of which scenario C is the most bullish model.