Posted: ’12-DEC-05 07:00′ GMT – Mineweb.net – Archive
Gold is becoming the Lance Armstrong of the investment world. After being written off as a sickly relic, a modest but sustained rise that’s already lasted four years is pushing the yellow metal back into the spotlight.
Bullion has extended its most recent winning run to seven trading days. The price ended at $526,30 an ounce on Friday night, its best finish for almost a quarter century.
It is little over a month since the fireworks started, appropriately, on Guy Fawkes Day (November 5). In that time gold has gained $70 or 15% with the trend accelerating as news of metal’s rejuvenation was picked up by the mass media. Almost half of the recent gains ($32,50) were posted since the beginning of December.
The crowd that’s converging on the hottest game around is sure to keep the momentum rolling.
From San Francisco to Sydney, Mumbai to Manchester, headlines over the weekend acted as a clarion call to new players, including: Gold’s best week in three years; Expert predicts gold at $850; Gold glitters in otherwise dull market; New 24 year high for gold.
Among the more detailed of the weekend’s reports was an interview with Merrill Lynch gold fund manager Graham Birch, described by The Guardian newspaper as “Britain’s Mr Goldfinger.” Not surprisingly, Birch says he expects further gains.
GFMS’s Paul Walker, a regular guest on Moneyweb Radio, received even more column centimetres. His newfound popularity in the global media follows a forecast that gold could spike at $850, where it peaked in January 1980 after a spectacular run where the price rose up to $50 a day.
Gold bugs have waited two decades, mostly in vain, for headlines like these. So these long time loyalists are being joined by thousands of professionals and amateurs alike, all wanting their share of the gold rush.
It looks like the newcomers are already moving in earnest. Gold traders Kitco.com reported that Friday was their busiest day ever with telephones ringing off the hook.
Although everyone seems to be predicting further gains, the metal’s performance this year has already exceeded all expectations. Last week’s rise took the price past the highest figure ventured a year ago by any of the world’s 25 leading gold sector analysts. These forecasts, carried on the World Gold Council website, follow a request to predict gold’s trading range during 2005.
Most optimistic was Michael Dudas, 41, of New York securities house Bear, Stearns. Honoured last year as one of Fortune magazine’s “All Star Analysts”, Dudas opted for a wide range by suggesting gold would trade between $400 and $525.
On average the 25 forecast gold would not rise above $480. JPMorgan’s Jon Bergtheil shared the wooden spoon with Bob Takai of Sumitomo in Tokyo. Neither expected the price to get past $460. If you are by any chance investing in a gold IRA read more. For the top precious metals custodians review go here.
Locally, hundreds of small investors are already ahead of the curve. On Moneyweb Radio, outspoken technical cycle analyst Issy Bacher correctly forecast the break above $500 a fortnight back, and strongly recommended buying shares. He believes local gold share prices could double or even treble from here.
Because their profits multiply when bullion’s value rises, during periods of gold fever prices of shares tend to provide a better return than, say, Krugerrands. For instance, between December 2000 and May 2002 when the gold price rose from $269 to $329 (and by 56% in rand terms), the JSE’s gold shares rocketed an astonishing 378%.
The JSE Gold Index’s recent bottom of 1 336 was reached in May, at which time bullion traded at $423, around $100 lower than today. Although the domestic currency has been strong, even in rand terms the gold price has appreciated by 31% in those six months.
On Friday, the JSE’s All Gold Index closed at 2 453, penetrating what technical analysts like Bacher believe was a key resistance level at 2 400. That move took the average gold share price’s appreciation since May to 83% – a hefty return for those fortunate enough to get in early. It is, however, nowhere near the spectacular gains which usually accompany rare periods when gold fever takes hold.
Because of consolidation in the South African mining industry, unlike during the run in 1980 when there were dozens of gold shares to choose from, only a handful of options remain.
Low cost producers Anglogold Ashanti and GoldFields Limited are recommended for conservative investors; higher cost Harmony and the developing mega-mine Western Areas for the more adventurous; while DRDGold, Sub Nigel and Simmer & Jack will appeal to speculators.
Aflease, although primarily a uranium play nowadays, also has a sizeable gold interest. One thing that is very popular is a 401k to gold IRA rollover.