GOLD ANALYSIS

No end to gold's surging price ahead?

With gold having come within spitting distance of $1300 so far this week, year-end targets are again being revised upwards.

Author: Lawrence Williams
Posted: Wednesday , 22 Sep 2010

DENVER - 

Gold has been continuing its recent price pattern this week - moving up, consolidating, moving up again and reaching new highs on each upwards step.    Markets are a little fickle, but there does seem to be a certain momentum developing which, on the current pattern will push the yellow metal through $1300 and then perhaps go on much higher. As long as continuing doubts remain about the true state of the global economy, and about the moves being made to try to stop major economies descending into depression, which tend to be gold positive, one can see little reason why this pattern should not continue.

On patterns over the past few years, September is usually a good month for increases in the gold price and obviously this year is no exception - but beware - October is more frequently a month of consolidation and as often as not sees a falling back before a surge in the final couple of months of the year.  Obviously whether this year follows this recent pattern remains to be seen, but as Harmony's Graham Briggs was recently quoted as saying on the sidelines of the Denver Gold Forum this week - "Three thousand dollars is unlikely at the end of the year, but if someone said fifteen hundred, that wouldn't strike me as too crazy a statement."

Indeed one gets the impression that nearly all the major gold company CEOs are very confident about gold's upwards pattern - otherwise they perhaps would not be making some of the investment decisions we have seen recently.  Some, like AngloGold Ashanti do seem to be taking perhaps a more conservative path to building up new resources as the company's CEO, Mark Cutifani, pointed out in an impressive presentation at the Gold Forum. He reckons his company has been able to increase its gold resources at a fraction of the cost that some of the company's peers seem to be paying - but then his expression of confidence in gold's future perhaps takes another form in the continued gold dehedging programme AngloGold has been undertaking.

Consensus opinion among analysts is also mostly positive and probably if one went out and polled them today, $1500 would now be a well-favoured number for the year end gold price.

"Gold continues to surge ahead -- and there's no end in sight" gold expert Jeff Nichols told Mineweb in an email..

"With gold prices nearing the psychologically important $1300 an ounce -- a price that just a few weeks ago most gold-market pundits did not think possible this year -- we reiterate our long-held view that gold could touch $1500 by the end of December." he comments. 

 

"Still higher prices -- $2000, $3000, and possibly more -- are likely in the years ahead."

 

As highlighted in the slightly uninspired Bull vs Bear lunchtime debate  on the first day of the Denver forum, there is an increasing fear among some of the mainstream followers of the market, though, that we could well see a sharp setback in the price at some stage, but so far no huge peaks have been seen, which is usually the first sign of a major correction ahead.  The price increases this year have been relatively steady with a rise of only around 16% since January - not a sign of the oft-quoted bubble scenario which is why so many of the mainstream analysts continually reiterate the ‘not in a bubble' viewpoint.

 

At the moment profit taking kicks in on each successive increase and once this selling pressure eases, which it seems to do after a relatively short period at the moment, the upwards momentum seems to continue again.  With $1300 gold very close at the moment it would not take much in the way of another item of disappointing economic news to drive it through.  How far, and how fast it moves from here remains to be seen, but on past patterns, as noted above, we could well see a correction in October and then a second surge to higher levels in November and December.  One may recall that Mineweb readers predicted in January this year a year-end gold price of $1433 for 2010.  On current gold price performance one wouldn't bet against this estimate being pretty close to reality come December 31^st!

 

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