PETALING JAYA: Gold futures soared to a 25-year high of US$596.80 an ounce on the New York Mercantile Exchange on April 3, before retreating to US$590.10 during intra-day trading yesterday, as investors locked in on gains. Gold prices closed at US$586 on April 4.
Bullion price for immediate delivery, meanwhile, moderated to US$585.24 an ounce yesterday after having lost US$1.45 since Tuesday.
The World Gold Council, in a March 29 newsletter, attributed the metal's rally to interest from investment funds, which had been the biggest buyers so far this year, as opposed to jewellers, who accounted for 73% of gold demand last year.
Global analysts, however, have differing views on whether prices would breach the “psychological” barrier of US$600. The last time bullion was traded above the US$600 mark was in December 1980.
Commodity Warrants Australia analyst Duncan Cruickshank told Bloomberg that gold prices would hit US$600, saying: “People are piling in. People will make more money even at these levels.”
Analysts Jordan Kotick and Phil Roberts from Britain's Barclays Capital even went as far as to estimate that prices could reach US$621 per ounce if gold were to breach US$600.
Despite the obvious optimism among most analysts, others do not see the picture continuing to be rosy, saying that gold prices are poised to fall because metals do not offer fixed returns like bonds, especially when both the US Treasuries and the Federal Reserve plan to raise their respective yield and interest rates on inflation concerns.
NationalFutures.com analyst John Person disagreed with Kotick and Robert, saying: “The Federal Reserve is committed to raising rates. We are looking at a possible correction that may take prices down to the US$560 range.”
Besides investment funds, analysts said some central banks with a lot of greenback-denominated reserves were also buying into gold and selling the dollar to protect themselves from the falling greenback.
“Gold and the euro are the most likely to benefit from the Chinese, United Arab Emirates and other central banks' selling of dollars,” Wisdom Financial Inc senior market strategist Emanuel Balarie said.
While a March 31 Bloomberg survey found that 19 out of 30 analysts and investors recommended more bullion buying as the US$600 mark is the next realistic target, other investors think it might take some time and more efforts to push prices to that level after yesterday's round of profit-taking.
Did you find this article insightful?