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Wobbly global macro economic situation goading gold price - Chris Hart, Absa
In an interview on Radio 2000 @ 18:40 on Thursday, 6 April 2006
[miningmx.com] -- GOLD built a firm base during 2005 and there are strong global economic reasons for the price to move stronger, Absa economist Chris Hart said on Thursday.
"Gold built up a base during 2005 when it traded sideways. This is a move off that base, we'll have short periods of consolidation but effectively there are strong underlying reasons for the gold price to continue to move up," Hart said on the Moneyweb Power Hour business show on Radio 2000.
He argued the US, UK and Australia were facing macro-economic structural imbalances wrought by current account and budget deficits.
He said Japan was starting to withdraw its "free" money from investments around the world with an eye to interest rate hikes there later this year.
"It will provide a headwind for bond and stock markets around the world. Every country financing their deficit through free
money from Japan. Australia, the UK and the US are at risk.... It's those factors are starting to weigh on the market that's why you're getting an investor shift into gold," he said.
"Currencies that have a strong precious metal dimension will benefit from that," he said, explaining this was why the rand was firming against the dollar.
"For gold, there is quite a lot further to go because the structural imbalances are still deteriorating and there's absolutely no political will on the international horizon to resolve these imbalances. It's going to deteriorate," Hart said.
Gold was not rising because of inflationary reasons like it did in the 1970s. There was weakness in the dollar and euro. "The cohesion of the euro is under question, whether it can even stay together as a currency for many currencies. It doesn't seem as strong as it was a year ago," he said.
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