GOLD PRICE NEWS - The gold price reversed its Friday morning decline as the price of gold rallied above $1,150 per ounce on the back of a strengthening euro. The gold price rally came amid the U.S. dollar declining against its European counterpart as Greek bond yields fell on the hope that the EU-IMF rescue package, expected to be implemented as early as this weekend, will temporarily reduce concerns of a Greek default.
As the gold price has remained within $100 of its all-time high of $1,226.50 per ounce, numerous market strategists have raised their forecasts for the price of gold. The latest such strategist to do so was Bart Melek of BMO Capital Markets, who projected that the gold price could reach $1,600 per ounce by 2011. In his report, Melek cited a bevy of factors that should continue to contribute to the gold price advance - including long-term inflation concerns, sovereign debt issues, the relatively poor long-term outlook for the U.S. dollar and fiat currencies in general, and the market expectation that the Federal Reserve will not aggressively raise interest rates.
The BMO report went on to point out two additional factors supportive of higher gold prices. First, gold producers are engaging in essentially no hedging, and the official sector has become a significant net buyer of gold for the first time in more than 20 years. Furthermore, central banks may add to their gold reserves in order to diversify their foreign exchange holdings amid the currency debasement rampant across the globe. As for the International Monetary Fund’s plan to sell the remaining 191.3 metric tons of gold announced last fall, Melek expects it to have only a modest negative impact on the price of gold.
As for the gold price’s sister precious metal, BMO forecasted a silver price of $18.75 per ounce, as the remainder of 2010 “looks shiny.” Moreover, the price of silver is likely to continue to benefit from the ongoing global economic recovery as well as its “gold-like qualities, which make physical silver a hedge against inflation and a currency risk.”
Alongside BMO’s positive view on the gold price and the entire precious metals space, the BMO strategist contended that industrial commodities will continue to perform well into 2011. His report highlighted “considerable risks” associated with the U.S. dollar and other developed world fiat currencies as a driver of further gains in commodity prices, along with supply concerns and greater interest in the sector as a “bona fide” asset class moving forward. Copper, metallurgical coal and iron ore remain the firm’s top picks for 2010.
