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Gold Prices Finally Catch Fire

by: FP Trading Desk September 19, 2008 | about stocks: ABX / GDX / GLD / LIHR / NEM    

FP Trading Desk

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It took longer than almost anyone expected, but gold prices finally caught fire on Thursday and rose a breathtaking $70 an ounce. And according to Citigroup Global Markets analyst John Hill, this may just be the start.

Mr. Hill wrote:

Gold is finally displaying classic safe-haven attributes and de-coupling from other commodities, after being held down recently by de-leveraging, distress selling and dis-inflation.

Mr. Hill figures those are short-term impacts that masked the the strong physical demand for bullion.

Mr. Hill wrote:

Gold appears to be entering a powerful new phase of investment demand tied to safe-haven and monetization themes.

No matter what, Mr. Hill thinks the outlook for gold looks strong. If the United States sinks into a deep recession that spreads into emerging markets, he expects gold would "double or triple" from current levels. A more likely outcome is slow growth accompanied by monetization and socialization of derivative losses, which he figures is likely to hurt paper currencies and help gold.

He expects gold to move higher through 2009 and 2010 and is maintaining average forecasts in those years of $950 and $1,000 an ounce respectively. But if the macro environment deteriorates, he thinks it could rise to uncharted territory.

Mr. Hill's top picks in the sector are Barrick Gold Corp. (ABX), Peter Hambro Mining PLC, Lihir Gold Ltd. (LIHR) , and Newmont Mining Corp. (NEM). 

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This article has 13 comments:

  •  
    Sep 19 06:53 AM
    Get with it. Gold is done. You seeking alpha people are always late.
    Reply
  •  
    Sep 19 07:46 AM
    Yes this was the dying gasp for gold as it heads down.
    Reply
  •  
    Sep 19 08:26 AM
    Hey CLH, we gave you up for dead! Glad to see you still kicking. And Kicking you will be as your USD goes down the drain and gold hits NEW highs over the next 6-12 months!
    Reply
  •  
    Sep 19 09:32 AM
    Are my eyes deceiving me or has there been nearly a $100 drop in gold price from the high Thursday afternoon to the low at about 4:45am EDT? Let's see, the Fed floods the world with $84-billion on Monday, and the reports are that world's central banks (including Canada's) all will chip in for another $187 on Friday . . . that is $.271-TRILLION new paper 'dollars' in one week. And 'investors' prefer dollars over gold and silver? Maybe the world has gone mad !

    I seem to recall that after all the previous 'rescue attempts' the stock market tanked day or two later. Does that mean that this latest 'mother of all rescue attempts' will result in the 'mother of all crashes?'

    Tune in next week to see . . .
    Reply
  •  
    Sep 19 09:56 AM
    My significant gold savings are looking especially bright and shiny. I may have to use sunglasses the next time I examine my collection.
    Reply
  •  
    Sep 19 10:07 AM
    The government grand pooh-bahs have a meeting and promise to monetize all the bad debt: problem fixed! Wow, that was easy. Alright everything is okay now. Just like the everything-is-okay-gla... fuzzy feelings after Bear Sterns and again after the Fannie and Freddie bailouts. When WaMu wipes out the FDIC reserves and Morgan Stanley goes down in the next few weeks the panic will be even bigger because the clueless actually believe the government is the tooth-fairy and those trillions of dollars will just magically appear. The combination of flight to safety and the coming inflation from all these bailouts are fundamentals that can only lead to higher gold and silver prices over the next year.
    Reply
  •  
    Sep 19 12:49 PM
    I am so encouraged to see that our Government is going to save us!!
    Who knew that there was no limit to the number of institutions they can bail out!! I think that my family is on that list somewhere- I know that they won't let me down!
    I mean I know that the country is broke and I know that the country is in debt but they just keep printing more money! I admire that they are working so hard for all of us... you know, keeping those printing presses going all night. Those poor fellas working all those long hours at the Fed to create all that money! Good for us that we have such smart people working for us. I sleep so well at night knowing that our Government will make sure that the top people in those companies that failed us get to keep their millions... because you know, I am sure they were just trying to do their job. It's good to know that the Govt. understands all that..
    I think that we should all just sell our gold and silver and rest assured that when they promise us everything will be alright, it will be. Why...we could just go spend our money on some banking stocks! I think they said that if the banks fail they will cover the deposits...so it seems like it no matter what we invest in - we win!!! Wow!! This market rocks!!!
    Reply
  •  
    Sep 19 02:17 PM
    Yes, the government is all-powerful. What a relief. I'll just sell my gold before its value goes to zero. Oh, the value of gold can't go to zero? I must have been talking about the dollar.
    Reply
  •  
    Sep 19 03:42 PM
    Do they trade $Zimbabwe on the forex?

    I'm thinking that there may be some good profits to be made buying the $Z/$US cross.

    OK. Seriously.....

    Mr. Hill thinks gold might get all the way up to $950 in 2009 and maybe even as high as $1000 by 2010?

    Gosh, all the way back up to the July highs in only another 15 months?

    That's really sticking his neck out there. I wish I could be that sure.

    @GMiki. LOL. Good one.
    Reply
  •  
    Sep 19 11:37 PM
    Nobody knows what gold will do but you better have some, just in case. Its price has been held down by a series of left-field events which are unlikely to keep happening on a sustained basis. The day of reckoning must come to repay debt. It's only a matter of when.
    Reply
  •  
    Sep 20 12:05 PM
    What happens to a commodity,when there to much it? The price falls , now look at the broken supply chain that is suposed to keep a steady flow of Silver in the pipe lines to make medical,electronics(TV... that is not recycled? Then look at the Mints lack of keeping up with demand for Silver Coins,also the refinerarys are choked up like JM! Look at the huge difference in Spot Prices of Silver & the real Price to get Physical Silver & the time frame to take deliverly? Those that have physical,will not sell at these Paper Spot prices & I dont blame them! Gold has not faced as much of a shortage yet,but it could real fast! Then what will happen to the price of Physical Gold? Then if you add in the results of what Congress does, a track record of bad policey by both sides,programs that fail, radical leaders in the Senate that at best, can name post offices & waste Billions on a Failed Energy Scam,and if that is not enough,wait untill the tree huggers bring the Cap & Trade Scam back, & they will! You think the price to heat your home or biz is high now,just wait untill the TVAs & other energy providers have to buy Carbon Credits to produce Energy,they will pass the cost to the people.This will cause prodution to fall like brick, then what will be the price of Gold?
    If you visit some the really good fourms,where folks from all walks of life,talk in easy to understand terms,you will find,world wide views that express what is really the results of all that happen in the world markets.Silverseek.com has a very good fourm,where all can have a chance to interact without bias, it would be great if the MSM would stop in to see Facts,posted by very smart folks!
    Got any Silver or Gold??
    Reply
  •  
    Sep 21 05:55 PM
    A lower US dollar is good for trades overseas. When other countries are unwilling to raise the value of their money, then it will be wise to keep ours low too. Remember when the Canadian Dollar worth only 65 cents US, thousands of Americans crossed the border to buy goods from Canada. 10 months ago, it was the opposite when Canadian dollar = 1.06 US. They came to US for shopping.
    Reply
  •  
    Sep 22 05:49 PM
    Face it folks, the idiots are running the markets right now. They sit back in their easy chair and let the software program make all the decisions for them.
    A computer program doesn't have the ability to predict what is going to happen in the future no more than any person trading stocks does.
    By all reason of human nature people should be loading up on comodities to shore up their position and ensure the confidence in the base medium used for trade (the dollar). Unfortunately computer programers never considered haveing to tread on this sort of ground. all the programers though of is a market that would continue to go up endlessly.
    News flash, there is a maximum level of confidence a certificate of trade can provide without demaning someone showing off the goods they represent in the trade.
    I perdict a new standard for all currencies around the world in the next five years. Some counties will start using consumable goods, some will use gold, and some will use other prescious metals. Get the picture, we will all soon revert to the old caveman standard of barter if the confidence in the US Dollar completly collaspses.
    Reply
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