Read this on another site here. Is mania or fear buying for the average investor not previously into the gold market far away???
Citigroup says long-term gold price could double or even triple
Citigroup suggests that inflation and the fabrication outlook favor gold.
Author: Dorothy Kosich
Posted: Monday , 30 Jun 2008
RENO, NV -
Citigroup forecasts that "gold is likely to regain $1,000/oz by end-08 and to work higher through 2009-2010."
In their recent Gold Commodity Update, Citigroup metals analysts John H. Hill and Graham Wark also predicted that "longer term, we believe that gold is capable of doubling or tripling from current levels."
The Citi global metals forecasts have an upward bias, at $906/$950/1000 average in 2008/09/10.
The analysts said "secular and seasonal factors favor gold" during the second half of this year. "We remain positive on gold, based on macro and supply/demand factors. The forces that have propelled gold for 5 years are firmly in place."
During the second quarter of this year, gold has averaged $896/oz, up 34% from the same quarter of 2007 and down 3% from the first quarter of this year. "Following a series of downside fundamental tests gold appears to have found a floor, and quietly climbed back to $917/oz."
"Despite extensive hand-wringing, the ‘floor in the dollar' has inflicted minimal damage," the analysts noted. "We believe the drivers of the gold bull market remain intact, heading into a favorable period."
"We see gold as well-positioned heading into Autumn, when fabrication tends to heighten the market," they added.
Nevertheless, Hill and Wark warned, "It will be important for seasonal/volatility dampened fabrication demand to recover, before gold can move higher." However, they added," Longer term, we would not be surprised to see gold double from current levels as the global policy prescriptions for the credit crunch remain powerfully and uniformly re-flationary."
Meanwhile, Citicorp suggested that slow de-hedging is unlikely to result in a gold market surplus, although they said it remains a key question. "We believe that the combination of wealth creation in China, petrodollars in Russia/Mid-East, and ETF inflows is likely to absorb possible additional ‘supply' of 200-300 TPY," the analysts advised.
In the meantime, "real interest rates are still strongly negative, inherently favoring hard assets and gold," Citigroup noted.
In their analysis Citigroup found that the principal Exchange Traded Funds hold 954 tonnes of gold bullion valued at US$24 billion, down 4% from peaks during the first quarter of this year. Total volume is equivalent to about 130 days of mine supply. The analysts noted that average daily gold ETF trading value was about $900 million, "more than that of Newmont and Barrick combined."
ETF holdings are up 5% or 39 tonnes from trough levels at the end of May amid profit-taking after $1,000, according to Citigroup.
"Gold correlations are evolving," the analysts noted. "Adherent owners of gold as portfolio insurance should be delighted in recent weeks as increasingly negative is being established between gold and the S&P 500. A strong positive correlation with oil has prevailed year-to-date. The negative correlation with dollar remains a fixture."
Citigroup's analysis also revealed that "gold shares have stalled as investors have flocked to physical bullion or FRF-rich bulk/base miners."
"Disappointingly, gold equities remain near levels seen when the gold was in the low $700s," the analysts determined. "On the other hand, cash flow should be strong with gold above $900/oz.
"The move in gold has been perhaps too sharp for the equities," the analysts said. "During a financial crisis, safe haven demand favors the simplicity of bullion."
Citigroup's" buy-rated" gold picks include Barrick, Peter Hambro, Lihir, and Newmont. However, the analysts cautioned, the second quarter is "likely muted due to flat gold amid energy/input escalation."
I think the gold equities will have another huge run...when/if the gold price really runs up. Time will tell. Do not ever forget this: the U.S. can talk all day, they can try raising rates and pay even more per day, week, month and year. But HAVE they or anyone offered or suggested ANY REAL solutions to the prevailing problems. This is about Debt, balance of trade, real shortages in certain commodities---inflation and a shift in world power. When I hear how the U.S. can possibly carry on while requiring about 1.5 BILLION dollars per DAY invested back, and TRILLIONS of dollars sitting offshore trying to figure out where to go, while decreasing in value, then I will take note. Until then, its all smoke and mirrors and BS. with the holders looking over their shoulders and trying to figure how to get out,not more in. Stay in gold, forget the volatility, its going way higher.imo
Same with High River.IMO Let the games get played, the value will assert over the next while. imo