By Kishori Krishnan Exclusive To Gold Investing News
The price of gold slipped below $920 an ounce in Europe on Wednesday, as a firmer greenback hit demand for the metal, It did remain in a relatively tight range though.
“As long as we stay between $915-940, gold is more or less stuck in a range trade,” said Michael Blumenroth, a trader at Deutsche Bank. “It would have to trade below $915 to see more of a down-move. There is a seasonal lack of demand so we shouldn’t expect to see any big moves to the upside,” he added.
Gold buying in India, the world’s largest bullion consumer, was weak as the dollar strengthened against the rupee, making the metal more expensive for local consumers.
Blumenroth said stock market weakness could be seen as a sign of fresh trouble for the economy, which may prompt further gold buying later in the year.
Platinum prices, however, hit their lowest since mid May, weakened by global economic concerns and worries that a potential clampdown on speculation in U.S. energy and commodity trading could jeopardise prospects for a US platinum exchange-traded fund.
Also pinning hopes on a “spectacular and prolonged rally” for the yellow metal is the renowned Wall Street financial forecaster and economist Peter Schiff. As the recession deepens and investors become disillusioned with the US dollar, Schiff is of the opinion that the global investment community will realise that gold represents the ultimate “store of value” as a safe haven replacement for a discredited US dollar.
In a recent on-camera interview with BNW Business News Wire, Schiff suggests that gold bullion and gold-related investments, such as gold equities, will prove to be the best way to shield one’s money from the ravages of a protracted and severe inflationary environment.
“If you really want to grow your wealth, you should own gold in the mining sector,” he adds, while also suggesting that gold equities (companies that are already in production) offer the greatest leverage to rising gold prices.
“With gold stocks, there’s obviously a lot of leverage to higher gold prices. As millions or billions of people discover gold as a store of value and as a way to escape inflation, there’s going to be tremendous demand and somebody’s going to have to supply that demand. It’s obviously going to have to be mined,” he says. “So the companies that have gold and mine it are going to see profit margins explode.”
Gold producers are set to be big beneficiaries of the paradox, he notes, that the noble metal is gradually reverting back to its traditional role as a last-resort hedge against economic turmoil and political crises at a time when underground supplies are beginning to dry up.
This suggests that gold stocks will be counter-cyclical investment stand-outs for the next few years, Schiff says. Against a grim backdrop of painful and pronounced economic contraction in North America, gold miners will literally have a license to print money.
“This is one sector that we can be very optimistic about because gold companies are going to be in the business of producing money. That’s going to be the money that people want. Not what the central banks are printing, but what gold mines are producing. That’s going to function as money,” he adds.
Run on gold?
Other analysts too are banking on a run. Buying by some of the world’s greatest investors may be the leading indicator for a quick 116 per cent climb, to $2,000 per ounce or higher, some traders say.
For the first time in a couple of decades, some of America’s most successful, big-name investors are buying gold.
David Einhorn, the hedge fund manager who predicted the downfall of Lehman Bros., recently bought gold for the first time.
Then there is John Paulson, the guy who made billions of dollars by correctly anticipating the housing bust and credit crisis. Paulson just plunked down $1.3 billion for an 11 per cent stake in AngloGold. He’s also got a big position in Kinross Gold.
Peter Munk, the 81-year-old chairman and founder of Barrick Gold, also offers up his own anecdote about gold’s broadening appeal. “I have had more phone calls in the past six months than ever before - from people who have $120,000 inherited from grandmother, and from hedge fund managers with millions,’ he says. â€˜I am not saying George Soros, but people of that caliber have told me they are buying gold.”
Entree Gold Inc. (AMEX: EGI) has jumped over 17 per cent at $1.43. The stock is currently trading at over three times it daily average volume. In the last one month, the stock gained over 40 per cent. On June 29, 2009, Entree Gold announced that the company has been active in the advancement of its properties in Mongolia, the US and China. Exploration programs are still underway and further results will be reported after a complete tabulation of the data.
Entree Gold Inc is an exploration-stage company engaged in the exploration of mineral resource properties located in Mongolia, China and the US.
Apollo Gold Corporation (USA) (AMEX: AGT) was marginally up by 2.48 per cent to $0.41, as was Kinross Gold Corporation (TSE:K) by 1.41 per cent to rest at $21.51. Goldcorp Inc (USA) (NYSE: GG) was up 0.24 per cent to $33.96.
A general decline in commodity prices, however, forecast its effect on gold. Gold stocks such as Barrick Gold Corp. (TSE:ABXC) was down 0.18 per cent to $38.22, while Pacific Gold Corp. (OTC:PCFG) was down 7.14 per cent to $0.0026.