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Gold rally......Sustainable

  1. RALPH5

    963 Posts.

    CBA: Gold rally is sustainable
    Sinéad Mangan
    21 May 2002
    THE recent upward climb of gold, which hit a two-year high today of US$317/oz, is sustainable in current market conditions, Commonwealth Bank of Australia commodity analyst David Thurtell said.

    Thurtell said the current rally in gold bullion price "had legs" because it was based on a physical interest in gold.

    "We think it has legs," Thurtell told MiningNews.net. "A lot of the rallies in the last two or three years in gold were due to frantic short covering by some players and really wasn't sustained on a strong physical interest as the current rally is."

    Thurtell said although physical demand from the Japanese had slackened off in the month of May there were a number of other factors causing the price jump overnight to US$314/15 on the New York spot market.

    "Things were a bit thin in European trade last night and that meant if there was one push either way it was exacerbated," Thurtell said.

    "We have had tensions in the Middle East, we have India and Pakistan with tensions on their borders - there has been something like a million people called up - and the US vice president Dick Cheney is worried about continuing terrorist attacks.

    "Basically, all the planets lined up for gold last night."

    The sliding US dollar was a main driving force behind a sustained increase in gold prices, Thurtell said.

    Australian stocks benefiting from the rising gold price included Lihir Gold shares up 3.5% to $1.45, AurionGold up 3.5% to $3.20, Croesus Mining up 4.47% to 70c, and Newcrest Mining up 1% to $6.95.

    Thurtell said it wasn't all good news for Australian gold producers as a sliding US dollar could knock out some of the profitability off some Australian operations.

    "If the Aussie goes higher, Australian gold producers are less likely to sell it forward," Thurtell said. "With less supply ahead in the market ahead from those producers that puts up the pressure on the US dollar gold price."

    The Australian Gold Council welcomed the price rise.

    "These increases demonstrate the value of Australian assets and have captured the attention of investors looking for safe, effective assets in the face of growing global uncertainty and a weaker US dollar," AGD chief executive Tamara Stevens said.

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