gold in 2003

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    Gold shoud replicate its 2002 performance - with interest!

    "Gold bugs expect hot times in 2003

    Climb to $510 foreseen by one analyst



    Tuesday, December 31, 2002 – Print Edition, Page B11

    VANCOUVER -- Year-end profit-taking drove down gold prices yesterday, but fans of the precious metal say conditions are right to maintain the price momentum it built up in 2002.

    Geopolitical tensions, falling worldwide production and gold's appeal as a hedge against faltering currencies drove gold's performance this year and point to a positive outlook for gold in 2003, said John Ing, president of Toronto-based investment firm Maison Placements Canada Inc.

    "There's no question that this is more than a year-end rally," said Mr. Ing, who predicts gold could soar to as high as $510 (U.S.) an ounce in 2003.

    The price of spot gold fell $5.90 or 1.7 per cent yesterday to $343.40 in New York, dropping for the first time in 15 sessions.

    Mr. Ing and other commentators say much of gold's climb in 2002, especially its dramatic jump in December can be attributed to a faltering U.S. dollar and worries over how a war between the United States and Iraq could affect the price of oil and other aspects of the global economy.

    Low interest rates and monetary policies aimed at boosting economic activity in countries such as the United States, Germany and Japan are also seen as setting the stage for a strong performance.

    The metal has traditionally been viewed as a haven in times of trouble, and was once considered an integral part of most investors' portfolios. Gold hit its record high of $850 an ounce in 1980.

    But in recent decades, its safe-haven image lost ground to the U.S. dollar. There were periodic rallies, but for most of the past five years, the gold scraped along at prices below $300 an ounce.

    This year, gold regained some of its allure, with spot prices rising by about 23 per cent 2002. Gold company stocks showed corresponding strength, with the S&P/TSX Canadian gold index climbing 41.2 per cent in 2002 as the S&P/TSX composite index fell 13.9 per cent.

    Gold prices surged in December, as war jitters and a faltering U.S. dollar sent investors hunting for safer alternatives.

    Gold's renewed appeal was reflected in rising spot and future prices, and in reports of brisk business in gold coins and even bars.

    By mid-December, the U.S. Mint in Washington had sold out many of its gold collectibles, including one-ounce and half-ounce American Eagle gold coins.

    "When the economy is a little bit shaky or hesitant, a lot of people are a little more comfortable putting their money into gold," said spokesman Doug Hecox.

    Reduced hedging by gold producers is also likely to boost gold demand and prices, boosters say, as is falling production. Weak prices over the past five years have cramped exploration budgets, and many producers face flat or declining production.

    Some new projects could be hurried along by improved prices, said Rex McLennan, executive vice-president and chief financial officer of Vancouver-based Placer Dome Inc. In particular, higher gold and copper prices could spur development of Placer Dome's 51-per-cent-owned Aldebaran property in Chile, he said.

    "That [project] is on the margin and could benefit enormously from continuation of these higher prices," he added.

    About 60 per cent of the world's total gold production is used to make jewellery. Jewellery demand dropped in the first part of 2002 as gold prices rose, according to the London-based World Gold Council. But as the year ended, increased investment interest was seen to be driving gold prices higher, with traders reporting increased interest from buyers in the Middle East as anxiety over a possible war intensified."
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