Gold, silver prices aim at the stratosphere
Analysts: Gold at $1,200 is possible; so is silver at $20
Tom Stundza -- Purchasing, 11/23/2009 1:09:30 PM
Prices of gold could hit $1,200/troy ounce and silver prices could get as high as $20/oz level in the short term, as surging investment drives prices higher, according to London-based analysts at Barclays Capital and GFMS Ltd. Gold has never been that high and silver last was at that kevel in 1980 when the Hunt Brothers of Texas tried to corner the market with a 200 million oz stockpile.
The silver price has averaged $14.73/oz so far this year, a 5% year-on-year decline, and running slightly below the GFMS average silver price forecast of $14.78 for 2009. But, the dollar is weak and speculators are looking for alternative investments beyond securities so silver bullion is averaging $17.66 this month.
Meanwhile, gold today was $1,167/oz and, according to the Barclay's note to clients, "has entered a seasonally bullish period." With the precious metal averaging $1,120 this month, Barclays says "it is performing well when priced against major currencies," which will result in even higher prices in December.
Since September, there has been "a robust expansion in all investment arenas," the GFMS report says, with silver benefiting from gold's strength, the weakness of the U.S. dollar, some investor concerns over higher inflation and a general growth in investors' interest in commodities amid a low-interest rate environment.
Silver ETF holdings had increased by 100 million ounces between January and October and GFMS forecasts that investment demand for silver could likely exceed 207 million ounces for the year.
Investment buying has also been encouraged by a spate of acquisitions of gold by central banks, most notably that of India, whose purchase of 200 metric tons of the precious metal from the International Monetary Fund was announced in early November.
Meanwhile, Reuters is reporting that the dollar extended broad losses on Monday, hitting a six-week low versus the yen after comments from Federal Reserve Bank officials bolstered the view that U.S. interest rates will stay low. Weakness in the U.S. currency boosts the appeal of gold and silver as an alternative asset and makes dollar-priced commodities cheaper for holders of other currencies.
Oil prices rose 1% today to around $78 a barrel, after the U.S. dollar lost its footing and heightened tensions between key oil exporter Iran and Western nations raised speculation of a potential supply threat. Strong oil prices raise the precious metals' safe-haven appeal against inflation.
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