gold to $1,800/oz within yearWell, we will see
Analyst: Faltering market conditions could push gold to $1,800/oz within year
03.17.08, 1:50 PM ET
SAN FRANCISCO (Thomson Financial) - Gold could reach $1,800 an ounce within the year as investors turn to the yellow metal for shelter amid deterioration in capital markets, an analyst said Monday.
In the shadow of Sunday's 'bailout' of Bear Stearns (nyse: BSC - news - people ) 'conditions in the major financial markets have deteriorated further, which we believe increases the probability of a sharp upward spiral in the gold price,' analyst Paradigm Capital Analyst Don MacLean said.
MacLean said he now believes there is a 40% to 50% chance that gold will reach $1,800/oz within a year, up from a previous estimate of a 25% chance back in January.
April gold futures were last trading up 60 cents at $1,000.10 an ounce, after reaching a record high of $1,033.90 in intraday trading.
In a note to clients MacLean cited the emergence of a confluence of factors that, historically, have pushed the price of gold upward, such as high amounts of liquidity provided by central banks, record high risk spreads, declining interest rates in major economies and a weakening U.S. dollar.
Soaring gold prices also have the effect of drawing more interest in the gold sector, he noted.
If the gold price spirals upwards, gold stocks should rise with the metal's price, MacLean said.
However, gold stocks are still equities, and broad downward pressure on equities will probably hinder their performance, he said.
'[P]ast experience suggests that gold equities will lag, viewing the spiral as unsustainable. In this case the metal is liable to outperform. It would make sense for investors to hold a meaningful portion of their gold position in ETFs for the metal.'
Shares of the iShares COMEX Gold Trust (IAU) were up 43 cents at $99.58 in intraday trading. The streetTRACKS Gold Shars ETF (GLD) was up 53 cents at $99.24.
Meanwhile, the Market Vectors Gold Miners ETF (GDX) was down 3.2% at $54.61.
MacLean rated shares of gold miners at buy and recommended the most liquid stocks among gold-oriented holdings, including Yamana Gold (nyse: AUY - news - people ) Inc. and Agnico Eagle Mines Ltd. Yamana stock was down 25 cents at $19.14. Agnico Eagle shares were up 35 cents at $80.40 on volume around 30% higher than the 30-day trading average.
Brigid Gaffikin
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