gold usd $1000 per oz

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    PERTH – An Aussie investment bank claims global financial markets could be entering an epoch that turns the clock back to the 1970s when paper assets fell out of favour in place of hard assets such as gold, the value of which it prophesises could test US$1,000 per ounce as a result.
    According to its The Alchemist newsletter, RFC Capital says if the US dollar continues to deteriorate, and now that gold has breached the US$400/oz resistance level, next year promises to be a volatile period which could see the price surge to US$500/oz. An ostensible edginess in the form of significantly reduced COMEX gold short positions was already emerging.

    RFC analyst Richard Harris indicated that the long-term paper to real asset shift in funds is represented in the Dow Jones/gold price index. “In the past it has traded below 5:1,” he explained. “If this ratio level is reached once again, and assuming the Dow falls from current levels of 9,900 to 5,000 (points), gold could touch US$1,000/oz if a 5:1 Dow/Gold ratio returned.”

    There were a number of key factors currently aligning that appeared positive for gold, most notably macro-economic developments. “Demand for the US dollar has waned on concern the US will not attract enough capital to fund its current account deficit which is forecast to break US$500 billion, equivalent to 5 percent of GDP, this year,” noted Perth-based Harris. “This enormous rising trade deficit is putting strong downward pressure on the US dollar which has fallen 20 percent against the Euro over the course of the last 12 months.”

    In addition, reflation policies and other fundamental drivers are putting pressure on the Federal Reserve to increase US interest rates, threatening an inflationary backlash, and “with political/military tensions heightening in Iraq/Middle East, the financial/political conditions are ripe for a rout of the US dollar and a flight into the security of gold", he said.

    President of the world’s largest gold company Newmont Mining Corp [NYSE:NEM], Pierre Lassonde, conveyed similar rationale in his address four months ago at the annual Diggers & Dealers Forum in Kalgoorlie to support his prediction that gold would hit US$450/oz in 2004.

    A spike in inflation could trigger “the next longer term leg for further upside to the US dollar gold price", suggested Goldman Sachs JB Were (GSJBW) analyst, Malcolm Southwood. “With the renewed focus on the US deficits, the Barrick Gold change towards hedging and the US dollar weakness (expected to persist), we … would not be surprised to see gold above US$450/oz at some time over the next 12 months.”

    Perhaps Lassonde and GSJBW’s forecasts are looking a bit conservative if RFC’s foretelling comes to pass.

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