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The gold market will see some volatility in the short-term - Paul Walker, GFMS In an interview on ClassicFM @ 18:15 on Friday, 11 January 2008 [miningmx.com] -- THERE would be short-term volatility in the gold market as demand from the jewellery sector eased off but long-term fundamentals were still positive for the metal GFMS CEO Paul Walker said. “I suspect we’ll see some real volatility in gold. The reason for this is that jewellery demand - the bedrock that kind of defines where the floor for the gold price is over a period of time – has fallen away to a great degree, especially in the fourth quarter of last year,” said Walker. The fall in physical demand tended to frighten away buyers of the metal in the short term. “The floor for the gold price at the moment is probably not significantly higher than it would have been before Christmas, so you’re still talking about prices in the very high $700s or early $800s – probably in the early $800s. “That suggests to me there’s some real short-term price risk in that you could see the price coming off very sharply,” he said on Classic Business, a week-nightly radio broadcast. However, economic fundamentals were still positive for the yellow metal. “The backdrop for gold is still very positive and the secular trend is upwards. “So, do we see $1000 this year? – I would certainly not be the one writing it off and I think we’ll see a trend in that direction,” said Walker. He added: “It’s going to go through $900 - it’s a matter of when, not if. Commenting on rising production costs, Walker said: “There is a broader cost issue here, which is the backdrop of higher oil. It’s an energy intensive business and it’s come through there,” he said. Wage demands were also of concern. “We live in a less unionised world but have a look at the public sector in the UK - they’re calling for 7%. Do we start to see an era of cost/push inflation on the back of these factors? “There’s no doubt that’s feeding into broader fears about inflation in the global economy. As we know, historically it’s been shown that gold responds very well to high inflation - it tends to go up - so, I think it’s true we’re going to see gold responding to this rising fear of inflation,” said Walker Meanwhile, the platinum market looked positive in the long term. “It’s going to be a positive one, partly because of gold, because there is a relationship there. “One would say, all things being equal, as gold pushes towards $1,000 then platinum is going to be pushing significantly higher as well,” said Walker.
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