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Archive of 2005's Notable Stories and Gold News

2005

Gold gains new currency in uncertain times (Australian 12/28)
For thousands of years, gold has been considered the store of last resort. As a status symbol it has few rivals. Gold has been propelled upwards on a wave of buying, driven not only by Indians' demand for jewellery but also by Japanese consumers worried about inflation, recycling by Middle Eastern investors of their petro-dollars and, not least, investment inflows from hedge funds and other speculators. Something of its mystique was captured by no less a figure than Alan Greenspan, the venerable Federal Reserve chairman. Speaking to the US Congress in 1999, he said: "Gold still represents the ultimate form of payment in the world. Fiat money, in extremis, is accepted by nobody. Gold is always accepted."

Gold is being bought as a physical alternative to other global currencies at a time when all are suffering from uncertainty. "The world's top three currencies - the dollar, the euro and the yen - all happen to evince structural weaknesses," Mr Paris-Horvitz says. While the dollar currently offers higher returns than its two rivals, its performance is overshadowed by the US budget deficit and current account imbalances. The euro is affected by Europe's sluggish economy and political uncertainty, while interest rates in Japan are at near-zero levels. David Rosenberg, a US economist with Merrill Lynch, says: "Investors want to own gold as a non-political, non-national currency."

AUDIO: Gold on NPR's All Things Considered
(npr 12/9)
[If needed, download RealPlayer]

Could gold blaze back to its all-time high? (Times 12/18)
The gold price has gained nearly 16% so far this year and touched a high of $540 on Monday, before plunging to $508 by the end of the week because of heavy selling in Japan. However, many analysts think the pullback will prove temporary and the gold price will rally further next year, possibly even regaining the nominal peak of $850 that it achieved in January 1980, when markets were in the grip of a global inflation scare. However, $850 then was worth about $2,500 in today's terms.

Discovering Gold Again (Forbes 12/15)
Gold surpassed the $500 per ounce plateau and is currently outperforming every currency in the world. The short but obvious answer to what is driving up the price is demand. China and India -- both of these nations have been growing in economic spades, and with their economic growth has come paper wealth and an almost instinctive need to convert this paper into assets with intrinsic value. Greater paper wealth in both countries translates into greater demand for conversion into gold. Since 1975, American citizens have had the ability to purchase gold freely for private ownership without any licensing or restrictions of any kind. Chinese citizens were just granted this right in 2002, and not until recently have they been able to freely walk into a bank and purchase gold. What does this mean? Newly granted freedom of ownership. Recently published statistics peg American ownership in gold totaling 1.4 grams per person; compare that to less than one-tenth of a gram per Chinese citizen. You really don't have to do the math to figure that there's a relatively huge void of ownership that should surely be filled. Couple this with the notion that the Chinese have a more traditional perception and appreciation for the intrinsic value of gold, and you have the possible makings for per capita Chinese gold ownership to soar beyond American levels...more

Special Contributor -- Where have all the projects gone! (vonBraun)
The scramble for gold reserves after years of shabby exploration investment.

Gold looks good after glittering year (Reuters 12/30)
Gold served up glittering returns in 2005 as many funds and investors included it in their portfolios for the first time in years and analysts saw no sign of the rally fizzling out in 2006. The metal's buoyant tone turned out to be the beginning of a roaring rally in early November, with gold sprinting up by 19 percent in just one month and staying above the psychological level of $500 for most of that time.

Miners mired even as metal soars (FinancialTimes 12/28)
The price of gold has doubled over the past five years, so it stands to reason that companies that dig the precious metal out of the ground must be laughing all the way to the bank. They are not, and the challenges facing the industry are only going to get harder, not easier.

Gold Sought as Alternative to Dollar, Stocks (Blmbrg 12/27)
Gold has climbed 16 percent this year, outpacing the Standard & Poor's 4.9 percent gain. The 10-year Treasury has returned only 2 percent through Dec. 23, including price change and interest payments. Global monetary conditions are conducive to higher gold prices as investors seek alternatives to the dollar. "It is a diversification story," said a London-based analyst. "The Asian central banks have got almost $2 trillion in reserves now. They will look to diversify some of that."...more

Gold expected to scale new heights in 2006 (SA 12/23)
The price of gold is expected to climb to fresh long-term highs during 2006, mainly on the back of investor demand for the metal, analysts and traders said. Other factors expected to boost gold in 2006 are increased central-bank buying of gold for reserve holdings as well as inflationary concerns. "Key to the gold market was Asian central bank buying of gold. The Russian central bank recently indicated that it had started to buy gold."

Dig into gold and silver for a safer future (EconTimes 12/19)
In a fundamental way we must see gold prices as a function of the crude oil prices. Traditionally, since 1970 until the '90s, the price of every troy ounce of gold was equal to 16 barrels of oil. However, after '01 when oil prices began to move up sharply, gold failed to keep pace. It is expected that gold prices will continue to rise in the near term as hedge funds will sell oil and buy into gold. If we assume that the traditional ratio will be restored in the long term, then the price of gold should touch $1,000 per ounce...

Russian Central Bank will Reevaluate Gold (Kommersant 12/14)
Yesterday, Bank of Russia announced that starting from January 1, 2006 it will re-evaluate the gold in the country reserve according to market prices. This decision was explain by the "necessity of aligning the published data with current market realities." However, it looks like in reality the Central Bank (CB) is getting ready to buy massive amounts of gold, and the market prices will allow the bank to avoid accounting mistakes.

Gold at $1,000? (FinancialPost 12/12)
The world is awash with money right now and it's looking for places to go.

Popular myths don't explain rise in gold price (BizReport 12/12)
Previously, central banks across the globe were involved in a race to the bottom as they furiously bought dollars to devalue their currencies and to stimulate exports. But the free lunch is over and central banks are diversifying their portfolios because, export promotion or no export promotion, nobody wants to be left holding dollars after the party is over.

Special Contributor -- King Kong signals rising gold (vonBraun 12/11)
It may well be that it's dollar-devaluation time again.

Lustrous gold outshines the big currencies (FT 12/9)
The truth is that all the major currency areas are burdened by debt and fiscal commitments that cannot be met out of their income. Some of these commitments will be paid. Some, such as US housing and consumer loans or European pension promises, will be defaulted on and some will be inflated away. During the coming years of the gold bull market, the world monetary system will be reconfigured with a much larger role for emerging market currencies and a much more frugal life, relatively speaking, for people in developed countries. The effect of advanced financial analysis, data gathering and computation has been to build ever larger inverted pyramids of debt and promises teetering on ever smaller bases of tangible assets. The gold price in the major currencies ... will continue a fitful, but dramatic, increase over the next several years.

Gold strong on funds and fundamentals (Reuters 12/9)
Gold's bull run is likely to continue in the near term as the metal is getting tremendous support from investment funds and positive fundamental factors. Gold prices were expected to continue to rise in 2006 and it was not impossible to see gold spiking to $850 an ounce in 12 to 18 months. Analysts said gold's bull run was continuing despite a rise in the dollar but the metal could gather more strength if the U.S. dollar weakened against major currencies.

Special Contributor -- Of Carnival Barkers, Cannibals, Stocks and Gold
Jon 'Black Blade' Warner takes aim at the ridiculous hawking that occurs at CNBC: "I always get a good chuckle when they say Gold is in a bear market and has not recovered to the temporary spike to $850/oz in 1980. Joe Kernan did say that Gold was a bad investment because it did not recover to $800/oz. Well that's nice, but all that tells me is that we have at least another $300/oz to the upside and perhaps another $800/oz beyond that adjusted for inflation. The argument Joe makes is utterly meaningless. ... Heck, the Nasdaq has not recovered to its high of about 5050. I mean the Nasdaq is over 55% off its high! Using Joe's reasoning, the last thing you would want to invest in are stocks! They have been horrible investments since March 2000!"

Special Contributor -- Kurt Richenächer Lecture, Munich Gold Show
Parts I & II -- The United States has the worst credit bubble in history. It is simply unprecedented, unimaginable... When Greenspan took over, total indebtedness of the United States was USD 10,000 billion. Today, total indebtedness is 37 trillion dollars.

Is $800 gold on the way? (The NY Sun 12/5)
Paul Van Eeden believes its price will double from here in three to five years. Frank Holmes thinks the $1,000 mark could be reached even sooner, by 2007. Oil-rich countries are increasingly recycling their petro-dollars into gold. Renewed interest in gold on the part of central banks is seen as yet another recent stimulus for rising purchases of the precious metal.

Punters take a shine to gold (Mercury 12/3)
Beijing-based People's Daily reported that Asian central banks are expected to further increase their gold reserves. Seen as a mouthpiece for the Chinese Government, if that particular newspaper is reporting the intent, you can be sure that China's central bank has already been picking up gold. The Asian central banks like to do things out of the spotlight. However, any move to buy more gold is going to place greater pressure on physical supply. ...even a hint of Asian central bank buying at present would set the gold market on fire.

Gold tops $500, at 23-yr high (Reuters 12/1)
Emanuel Balarie, senior market strategist at Wisdom Financial Inc. said, "I think we are going to crack $600 sometime in 2006." Balarie felt that one reason gold had room to rise further was that bullion's high of $850, touched in 1980, after being adjusted for inflation today, would be now worth around $2,150 in current dollars. "Gold is still very cheap when you look at it in that perspective."

Asian CBs likely to increase gold reserves (PeoplesDaily 12/1)
Central banks of Asian countries, including China, are expected to further increase their gold reserves, according to International Finance News reports.

Gold -- How precious can this metal get? (Globe&Mail 12/1)
Gold has climbed about 74 per cent while the Dow Jones industrial average has fallen about 1 per cent, a development attributed to a rise in investors' risk aversion. "Gold is now in its fifth year of a secular bull market, and if history acts as a useful guide, we could quite easily see another three to five years of solid performance."

Gold above $500 (Reuters 11/29)
Gold has risen more than 14 percent so far this year. "Over time, over history, it has always been a market that people have turned to when there has been an element of uncertainty in other asset classes," said Mark Keenan, fund manager at UK-based MPC Commodity Fund. "It's a question of diversification." Robin Edwards, president of Saber Fund Management, said gold prices could soar up to $800 an ounce over the next couple of years as the metal had supportive fundamentals. "The investors are diversifying portfolios. There is a feeling that currencies and equities are not necessarily reliable and they are adding to commodities because they see the returns are greater there," said Peter Hillyard, head of metals sales, at ANZ Investment Bank. The rally was also helped by reports that Russia, Argentina and South Africa had decided to increase the amount of gold in their reserves.

Gold analysts say the real rally is just beginning (BusinessDay 11/28)
Day one of the Gold & Precious Metals Investment Conference in San Francisco heard many analysts saying the rally is just starting. Measured gold against every major currency ­ the U.S. dollar, Canadian dollar, Australian dollar, euro, pound, yen and rand, gold was defeating them all. "This is a world-wide thing ­ not just the U.S." Robert Bishop, editor and publisher of "Gold Mining Stock Report," noted that only in the last six months has gold really taken off as a bull market, but said it could last another five to ten years.

Gold is hot and likely to get hotter (Blmbrg 11/28)
Newmont Mining Corp., the world's largest producer of gold, says the price of the precious metal may rise to more than US$1,000 an ounce.

Gold may rise 4th straight week, reach $500 (Blmbrg 11/28)
Gold is headed for a fifth consecutive annual gain and may outperform the DJIA for the second straight year. Gold futures in NY are up 12 percent, while the Dow 30 has climbed 1.4 percent and the S&P 500 is up 4.6 percent. During gold's five-year rally, including 2005, the precious metal has outperformed the Dow four times and the S&P three times.

Is it time to bank on gold? (BusinessStd 11/24)
Gold as a lucrative investment option? Yes, say analysts. Gold ­ even at the current high levels ­ is still a good buy. The prices are expected to climb up even further, led by a rise in physical demand in India, China and West Asia. And the demand is poised to gather momentum, which, in turn, will fuel the prices.

Russian Cental Bank could increase gold in reserves (RIA 11/24)
First Deputy Chairman of the Central Bank Alexei Ulyukayev said the bank would be purchasing gold "on all markets on which it is available," meaning both domestic and foreign markets. ... and confirmed a $60-billion increase in gold and currency reserves by year's end.

Putin: Russian Cental Bank should increase gold weighting in reserves (Interfax 11/22)
"I think that the CB should pay more attention to precious metals on Russian territory when forming its gold and foreign-exchange reserves. ... The reserves are, after all, gold and forex reserves. Let's not be too restrained here."

Rally in gold unlikely to run out of sheen (FT 11/19)
If no new gold reserves are found, current mine supply will fall to less than 50 tonnes in the next 25 years

Smart ones make a killing in gold (NewIndiaPress 11/17)
Gold is no longer a woman's preserve, and it has become an avenue for the smart investor seeking sizeable return. Now people have accepted gold as a good form of investment. A new class has emerged from within the middle class, who buy gold as small coins and bars purely as an investment proposition.

Strong longterm outlook for precious metals (mineweb 11/15)
Kenneth Rogoff, a former chief economist of the IMF and current Harvard professor, said that long-term fundamentals for precious metals were "tremendous"

Russian Central Bank may double proportion of gold reserves (RI 11/15)
The change was part of an ongoing effort to optimize the composition of assets and reserves managed by the bank. The bank is also encouraging the development of the Russian domestic gold market to be a fully functioning financial market akin to bonds and currencies. Russia presently has 500 tonnes of gold in reserves, the envisaged doubling as a proportion of all reserves at present values would consume all the country's annual gold output for around three years.

S.Africa central bank says might up gold reserves (Reuters 11/14)
"The central bank is very comfortable holding these gold reserves because of the metal's war-chest qualities, because gold is no-one's liability and because it allows prudent diversification in the bank's total reserves."

Merrill Lynch hammers gold hedging (miningmx 11/14)
Birch dealt out some hard criticism for bankers to whom the various hedging strategies were credited. "As soon as a company hedges, it takes away some option value from shareholders with bankers getting something in the middle. ... Banks are like drug dealers hanging outside schools tempting children with crack cocaine. ... It creates a culture of dependency where all the profits come from hedging."

German government should respect Bundesbank gold competence (Bloomberg 11/13)
Bundesbank President Axel Weber said the German central bank wasn't involved in plans by the new finance minister to sell gold and any such plan should respect the bank's responsibilities, which include managing the gold reserves.

Analysts see shift in gold/greenback correlation -- bullish on bullion (Globe&Mail 11/9)
The first leg of a three-leg advance will carry gold to $510 an ounce, possibly this year. "The second leg will see a high of $700 an ounce and who knows how high the third leg will be."

Gold breakout coming (WallStreetWindow 11/9)
The smart money is going long and the dumb money is getting shaken out. This consolidation phase is going to soon end with a massive upside breakout.

Gold a good asset for predicting inflation (Reuters 11/4)
"Because gold moves earlier than official measures of inflation, it works much better at anticipating monetary policy," the report said. "Since the real value of gold is roughly constant over time, changes in the gold prices of a currency tend to reflect changes in the market's evaluation of that currency."

Increase your weight in gold (FinancialStandard 11/3)
Prospects for gold have improved on inflation, investors should reduce allocation of cash

It always pays to invest in gold (INN 10/31)
Gold will be the most sought after asset in the future. As all investment professionals say that balance and diversification are essential to a sound portfolio, whatever is the investment approach, whether it's conservative or aggressive, whether our primary objective is safety, income, or growth, gold can surely play a valuable role in our portfolio.

Gold may rise as demand outpaces mining output (Bloomberg 10/31)
Second and third-tier central banks are quietly moving to increase their holdings of gold as a reserve asset

Dubai still enhancing its gold market position (Mineweb 10/31)
Dubai is continuing its relentless march into the centre of the bullion market

Refco: The Reckoning (BusinessWeek 10/28)
If investors needed a wake-up call about the potentially dangerous flood of money surging into private equity firms and hedge funds, they're getting it with the collapse of Refco Inc. ...sophisticated investors are growing increasingly distrustful.

Gold finds strength in Bernanke nomination (FT 10/26)
Nomination of Mr Bernanke was a positive for gold, having said two years ago that the Fed would "drop money from helicopters if necessary"

NY Times incoherent assault on gold mining (ResourceInvestor 10/24)
A profession where crusading wins more prizes than reporting.

Special Contributor -- Refco and Custodial Risk (vonBraun 10/23)
In light of the Refco debacle, most investors portfolios need a closer inspection that takes into account custodial, counterparty and currency risk issues

Rogers fund halts redemptions due to Refco (Reuters 10/20)
Due to "the incredibly rapid deterioration and subsequent bankruptcy" of counterparty, Refco, fund assets may be tied up in bankruptcy proceedings for some time

Feature Fundamentals predict gold over $850 (Crikey 10/19)
Gold has the midas touch

Gold rush on largest market amid inflation worries (AFX 10/16)
Record gold-buying spree as oil price-driven inflation threatens to wipe out savings

Gold gains kudos as alternative to major currencies (Reuters 10/13)
"Gold is hoarded by institutions and banks even while they say it has no monetary value, which means they are talking out of both sides of their mouths."

Rise in gold bad news for dollar (LA Times 10/12)
Is it inflation that's worrying investors? Or deflation? Or the prospect of a global economic crash? Either way, gold has caught fire.

Gold boosted by fund buying (Dowjones 10/11)
Gold is seeing some of the best interest in many years with geopolitical and natural disasters around the globe having ramifications for both economics and politics.

Gold, next stop $500/oz? (Mineweb 10/10)
Falling production falls in South Africa (world's largest producer), inflation fears in the US and increasing physical demand out of Asia are some of the many factors fuelling the gold price.

JPMorgan analyst says why gold is on the go (Fortune 10/17)
Limited future mine supply and the growing demand are pushing up prices as huge U.S. trade deficits are problem for the dollar.

Newmont's Lassonde stays with $525 gold target (Reuters 9/28)
Sees $525 by January 2006; in a longer-term view, "We are still looking at a significant increase in the gold prices."

Feature -- Gold Analysts see "petrodollars" fueling gains
DENVER, Sept 27 (Reuters) - Much of the strong demand driving a recent rally in gold prices has been powered by purchases in "petrodollars" from oil-rich countries
Denver Gold Forum 2005 -- Gold price analysis by M. Murenbeeld & Assoc. (pdf size 720k)

Analyst says $565 avg possible in 2006 (Reuters 9/27)
"Significant probability gold will average well over $500 next year."

Gold miners to weigh prices, challenges in Denver (Reuters 9/25)
Gold could hit $500 by year's end and $800 within one to two years

Gold prices to hit $500/oz by year end -- CEO (DowJones 9/20)
Could reach $800 within the next two years says CEO of Goldcorp

Argentina says inept IMF forces CB reserve buildup (Reuters)
Massing of cash and gold in Argentine and other central bank's vaults is a vote of non-confidence in the IMF

Argentina CB may increase gold holdings (Blmberg)
Central Banks sees gold "recovering its role as an asset protecting the portfolio against inflation and international financial crises"

Gold may gain 7% before year-end (Blmberg)
$500 gold is a matter of seeing when the tipping point in the U.S. economy will come... bonds, and especially stocks, are unlikely to do well.

Dubai exchange head sees gold at $500 soon (Reuters)
Paper currencies have proven time and time again that they are not very reliable... gold is becoming an important investment vehicle

Dumping US dollar could trigger 'economic 9/11' (Australian)
Strong possibility of financial meltdown following a collapse of confidence in the greenback.

Special Contributor -- Confronting Confiscation (Kosares)
In the face of far-reaching government confiscatory power over property and financial contracts, the investor need not throw in the towel in pursuing his best interest, specifically in regard to gold ownership.

Special Contributor -- Central Banks and 'The Conundrum' (Strauss)
A reserve shift toward gold to explain bond yields that aren't a conundrum

Gold shines through stock selloff (TheStreet)
Stocks may be selling off, but gold is glittering -- a safe haven against financial distress, a hard asset worth picking up

China to fuel gold to $725 (FinancialExpress)
Prices may reach $725 in 5 years as China overtakes India in gold demand

Gold long term outlook turning positive (DowJones)
Dollar's days as the world's reserve currency are numbered

China's demand for gold blooming (Xinhua)
Depreciation of the US dollar has stimulated investment in gold

Golden solution to the China syndrome? (Forbes)
Gold offers a viable alternative to buying more U.S. Treasury debt. Over time, other nations would join China in again holding gold as a way to reduce their dollar exposure.

China gives green light to gold (TexasHedgeRpt)
The citizens of China, all billion of them, have been given the freedom to own gold. Now the government is actually encouraging them to purchase gold as a form of savings.

Merrill Lynch sees gold at $725 (Bloomberg)
A privately owned financial-advisory company in Sydney, said gold may rise to $850 an ounce in as little as three years.

Gold predicted to double in coming months (RBI)
Price of spot gold could get as high as $850 per ounce in coming months from its current level slightly in excess of $425

Japan to reduce dollar holdings... (Forbes)
Japan hopes to rebalance its foreign exchange reserves with less US dollars when the dollar regains enough strength to withstand such a reform

Gold and oil signal serious inflation pressures ahead (CNN)
A handful of precious metals insiders at the recent New York Institutional Gold Conference predicted that the price of spot gold will hit $850 an ounce in the next few years from its current level near $440.

Special Contributor -- Why resistance at $427? (Mark Griffith)
This week, gold rising past 430 and the rupee falling through 44 to the dollar would be a strong combined signal to buy gold.

Gold price could triple by 2015 (Mineweb)
The price of gold is set to rocket, says gold analyst Dr David Davis ... but will mean investors having to be in the right place at the right time to make money. ... Dollar weakness is set to continue for the next ten years and supply/demand factors will "trigger a quantum upward change in the gold price".

Got Gold Fever? (TMF)
Gold making a comeback among investors while the Nasdaq has been pancaking. There are several ways to invest in gold; the most obvious is to actually own it.

Gold may rise as alternative asset to U.S. stocks (Bloomberg)
Demand for gold is so strong that metal refiners in Switzerland and Australia are working 24- seven putting product out. "People are buying gold to preserve capital."

$3,000 gold? (Dow Theory Letters)
Richard Russell says Dow/Gold ratio sending major buy (gold) signal

The Gold Market in China: A New Beginning (GFMS/WGC-pdf)
A timetable of liberalization marking the complete withdrawal of the Chinese government from physical resource allocation and the beginning of market-oriented allocation and regulation of gold resources.

Gold Price Overview AVERAGE annual prices: For 2005 gold touched an end-of-year London Fix high of $537.50, whereas its average price over the year was $444.50 -- up nearly 9 percent from 2004's average price of $409.25. 2003 had an average of $363.50 per ounce. The average price for 2002 was $310.00, and the average 2001 price was $271.00 per ounce. In percentage terms, year-by-year gains in average annual price for the price of gold over the past four years have been 8.6 percent, 14.4 percent, 17.3 percent, and 12.6 percent.

FOCUS: U.S. Dollar Crisis Could Catapult Gold Over $600, Dealer Says November 15 TOKYO (DowJones) -- The price of gold could surge to levels not seen since the early 1980s if a big chunk is taken out of the value of the U.S. dollar in coming years, one market insider says. A further devaluation of the greenback by 20-30 percent would make bullion more attractive as an alternative store of value and could propel the yellow metal over $600 a troy ounce, said Michael Kosares, founder and president of gold firm USAGOLD-Centennial Precious Metals Inc...(MORE... see full article here)