Gold Forecast to Rise to £1,800 (GBP)

By: Mark_OByrne

Gold  finished trading in New York yesterday at $920.90 , down $ 5 and silver  fell to $17.8 4 , down  1 cents . Gold  again traded down in the New York Globex electronic market  and in early trading in  Asia  prior to rallying in late trading in Asia and and early European trading  back above it's opening price in New York yesterday . 

Gold is up so far today  after Iranian state media reported that the country had test-fired missiles that could reach Israel i and U.S. bases in the region. Iran's state media reported that Iran had test-fired nine long-and medium-range missiles . The tests occurred at a time of increased tension between Iran and Israel over Tehran's nuclear programme, which the U.S.  fears is aimed at making bombs. Iran says its nuclear programme is for power generation.

Gold proved remarkably resilient yesterday and despite a rise in the dollar and the very sharp fall in oil prices and most of the other commodities, gold only fell by some 0.5%. Silver was even more resilient and was only down a fraction.

Despite oil falling some $10 or more than 7% in two days, gold has only fallen by 2.3% from it's recent high of $945 to today's $924 per ounce. Gold will continue to outperform oil as oil has well surpassed it inflation for adjusted high of some $100 per barrel while gold is less than half it's inflation adjusted high of 28 years ago. Reversion to the mean average is very likely.

Also in the event of a global recession, oil and nearly all commodities will be subject to demand destruction but gold's safe haven attributes and inverse correlation to equities and bonds will lead to increasing demand for and higher prices of gold.

The fall in commodity prices has given another dead cat bounce to equity markets and another brief bounce in the dollar which unfortunately will continue to fall and will  likely reach 2.00 to the euro in the next two years.
It would be wise to deal in reality and not engag e in more wishful thinking - the sort of thinking and denial that has got us into this  financial and economic debacle in the first place.

Gold  has now on consecutive days tested the 100 day moving average at $915 . S upport  remains at $915 and $900 should continue to provide strong support especially in the light of the increasing tensions with Iran . Although prices may need to consolidate at these levels prior to breaking through resistance at $945-$950 and rechallenging the psychological level of $1,000 per ounce.

Today's Data and Influences
With little  Euro zone or US data scheduled for release today , markets  will likely get  direction from breaking financial or geopolitical news and from movements in stock markets .

UK trade figures scheduled for release later today will be the highlight of an otherwise quiet economic calendar. Bank of England policy makers also begin their two day meeting today with their decision due tomorrow. No rate change is expected however, as they again seek to balance the growing threat of a slowdown with the risks to the economy from a housing crash , the highest inflation rate in a decade and stagflation .

Gold to Rise to £1,800 (GAP) Per Ounce
All of which will lead to markedly higher prices for gold in terms of sterling in the coming years. The last time the UK experience such conditions was in the 1970's and this led to a surge in the price of gold in terms of sterling as per the chart. Gold rose from below £30 to over £300 in some 10 years. A similar performance today would see gold rise from £180 to £1,800 per ounce and this looks very likely given that the fundamentals for gold today are actually more bullish than they were than.



Last year highly respected analyst, Louise Yamada predicted gold surpassing $3,000 within a decade.``Gold is the purest play against the dollar,'' said Louise Yamada, managing director of Yamada Technical Research Advisors LLC in New York and former head of technical research at Citigroup.

If the GAP/USED exchange rate were to remain around 2:1 that would lead to the price of gold reaching over £1,500 per ounce and Gold Investments believe that this is realistic long term price target given the host of extremely strong fundamental factors driving the gold market higher .

Silver
Silver is trading at $17.83 /17.89 per ounce (1130 GMT).

Pegs
Platinum is trading at $19.57/19.67 per ounce (1130 GMT).
Palladium is trading at $440/446 per ounce (1130  GMT).

By Mark O'Byrne, Executive Director

Gold and Silver Investments Ltd. have been awarded the MoneyMate and Investor Magazine Financial Analyst of 2006.

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