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July 18, 2005 The Economist Magazine and Hyperinflation |
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Weekly Markets Weekly Commentary Opinions Performance ( % Change)
Expected next SEC Chairman Chris Cox has invested in gold bullion & gold stocks. Weekly Markets Precious metals were flat to marginally down for the week. Precious Metals Gold is lower by $2.20 or some 0.5% for the week; from $422.70 to $420.50 Silver is was lower by $0.02 for the week. Platinum settled at $865 and was down some 1% for the week. Bloomberg's Danielle Rossingh wrote of how Merril Lynch's Graham Birch believes that rising demand for gold in China could drastically increase the price of gold in coming years. "The price of gold may rise to $725 an ounce as economic growth turns China into the world's biggest jewellery consumer, says Birch, who manages a Merrill Lynch fund that has grown fivefold since 2000. Rising demand in China and a weakening dollar pushed the price of gold in London to a 16-year high of $456.89 an ounce in December last year. Gold last reached $850 an ounce in January 1980. "The Chinese are getting richer, and have very high savings rates," says Birch, who helps manage about $8.5 billion in mining assets for Merrill Lynch. "As they earn more money, they will spend more on things like jewellery." "At current growth rates, Chinese consumers would have to buy at least another 293 tons of gold a year to overtake demand in India, the biggest market today. That tonnage is worth about $4bn and equal to more than six weeks of global mine production. "China's economy expanded 9.5% to about $1.65-trillion last year. Its 1.3 billion consumers are already the world's biggest users of commodities such as steel, cement, copper, tin and iron ore. "Chinese jewellery consumption rose more than 11% to 224.1 tons last year, according to London-based research group GFMS. It may increase to as much as 600 tons within five years, Birch says. "Indian consumers bought 517.5 tons of jewellery last year. "The question is: where is all that gold going to come from?" "Mine production fell 4.4% last year, according to GFMS. Citigroup concurs with Birch in Merrill Lynch and says the gold price this year will surpass the 16-year high reached in December. The Gartman Letter advocated going long gold in Euro terms:"Gold in EUR terms, given the sizeable rally of the EUR, is weak as it trades EUR 350.75, testing the point from which Gold/EUR broke out to the upside several weeks ago. We shall strongly urge those who did not buy gold in EUR terms to do so this morning upon receipt of this commentary. Those already long are urged very strongly to sit tight." Gold futures climbed back to end above $421 an ounce Friday, but prices for the precious metal marked a loss for the week after falling by nearly $7 over the previous two sessions. 'Relatively solid' economic data have provided some support for the dollar this week and correspondingly 'put severe pressure on gold,' said editor Brien Lundin in a recent Gold Newsletter. The 'greenback was already riding high off' Wednesday's US trade deficit data for May, which came in at a lower than expected 55.3 bln usd, he said. Then the Labor Department's consumer price index report issued Thursday surprisingly showed zero price inflation for the month of June. On Friday, the Labor Department reported that US producer prices were unchanged in June despite higher energy prices. Separately, the New York Federal Reserve reported continued manufacturing recovery in New York region in July. The dollar thus managed to maintain upward momentum against most foreign-exchange rivals to close out the week. But the prospects for gold and metals mining companies still 'look good,' said Lundin. 'If we haven't bottomed yet, we should only have two or three weeks left of short-term pain before beginning a rally that, typically, lasts through the fall,' he added. 'I believe the dollar remains overbought and the euro oversold,' said Lundin, pointing out that the euro should advance to the 1.25 usd level in the next few weeks, 'which would help give gold a leg up in dollar terms.' The Los Angeles Times and Chief Financial Officer (www.CFO.com) reported how Rep. Chris Cox, R-Calif., nominated to become Chairman of the Securities and Exchange Commission, Tuesday disclosed stock, mutual fund and other assets valued at between around $3 million and interestingly a large portion of his assets are in gold mining gold company, stocks and in gold bullion itself in the form of American Eagle gold bullion coins. Merrill
Lynch sees gold at $725 - Financial Express 
In order to read the complete newsletter please click here or on Gold Investments Weekly Newsletter - The Economist Magazine & Hyperinflation. 
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