Business

Saturday March 15, 2008

Analysts see gold hitting US$1,200 in three months

By LAALITHA HUNT




laalhunt@thestar.com.my

PETALING JAYA: US gold futures, which surged to a record US$1,001.50 on Thursday, is likely to breach US$1,200 an ounce within the next three months.

MIMB Investment Bank Bhd technical analysis manager Lee Cheng Hooi said gold could hit new highs this year on expectations of further Federal Reserve rate cuts and inflationary concerns.

“Based on monthly trends, gold prices are seen to be strong as investors see gold as a real and tangible asset and safe value haven amid economic uncertainties,” he added.

Aseambankers chief economist Suhaimi Ilias said gold was used as a hedge against the weakening dollar and inflationary pressures.

“History also proves that traditionally, gold is favoured during inflationary periods,” he said, adding that gold would continue its upward trend due to the volatility in the dollar.

TA Securities head of research Kaladher Govindan concurred that gold price, which was also driven by soaring crude oil prices that had scaled to a record US$111 a barrel, would continue to rise due to the weak US economy.

According to an AFP report, Asian economic giants China and India have also boosted demand for the precious metal, which is used in jewellery, dentistry and electronics.

“Gold, which is priced in dollars, becomes cheaper for buyers using other currencies when the US unit falls in value. The dollar slumped on Thursday against both the euro and yen as fresh credit jitters swept across global markets,” the report said.

The report added that gold price had risen by about 17% so far this year, spurred also by supply problems in the world's largest producer, South Africa.

“Stoppages by miners protesting unsafe working conditions and ongoing power cuts in South Africa have hampered supplies,” it said.

On the local front, Datuk Andrew Kam Tai Yeow, chairman and chief executive of London-listed Malaysian gold miner Peninsular Gold Ltd, said the overwhelming global demand for gold bode well for the local gold mining industry.

The company has invested RM60mil in the East Coast Economic Region to build a plant in Raub, Pahang. The plant, expected to start production soon, will be able to extract 85% of the gold residue left in mine tailings.

“We would consider increasing our investment as we see a lot of potential, going forward,” he said.

However, trading in local jewellers such as Poh Kong Holdings Bhd and DeGem Bhd was thin despite the recent spike in gold price.

An analyst attributed this to the local political situation and global volatility.

The upward trend in gold price would not necessarily translate into higher share prices for gold jewellers; instead investors preferred to invest in the commodity itself, the analyst added.

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