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Licata: Gold Headed for $1,375 as Fed Loses Faith in Recovery

By    |   Friday, 13 Aug 2010 01:07 PM

The faltering global economic recovery will send gold prices higher, with the precious metal reaching $1,375 an ounce, says commodities expert John Licata.

The Federal Reserve’s decision to expand its quantitative easing through bond purchases confirms his view, Licata, chief commodity strategist at Blue Phoenix, an energy and metals research firm, told Newsmax.TV Money.

“The Fed has made the move because they are not confident in the economic recovery we’re seeing right now,” he said.

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“I think that’s going to be beneficial to the price of gold… A lack of confidence in the second-half recovery was definitely validated by the Fed’s response.”

In addition, there hasn’t been much new supply coming on the gold market, Licata notes. Some projects are more attractive for miners now after the recent run-up in gold prices, he says.

But while it costs $400 an ounce to mine gold now, it costs $950 to $1,000 an ounce to build a new mine, putting a cap on supply.

Looking at the supply and demand dynamics together, gold is an asset play you can’t afford to leave out of your portfolio, Licata said.

He says both physical gold and mining stocks are attractive investments. “I had a meeting with the CEO of Nova Gold in New York City, and I was quite enthusiastic about that name.”

As for other metals, Licata is bullish on indium. “It’s an unknown miner metal that China has accumulated. It’s extremely finite.”

Intel is talking about using indium in its chips, and the metal can be used in the solar industry too, Licata says. “It’s one to watch.”

He also likes natural gas, which is trading at multiyear lows. While there is clearly excess supply now, that was also true in 2003, when natural-gas prices doubled.

“I’m not suggesting that lightning is going to strike twice,” Licata said. “But I do think that some of that excess supply can be absorbed by utility companies that have their co-generation plants maybe using natural gas as a cheaper source of energy as opposed to using coal.”

There are a lot of catalysts to push natural gas higher, Licata says. “If we start moving more toward a natural-gas movement in automobiles, I think this is something that could be the most compelling story in energy.”

On the currency front, Licata recommends the Canadian dollar. “The loonie is a great way to play the rise in metals prices as well as energy,” he said.

“There are a lot of opportunities in Canada, whether we’re talking about uranium, gold or oil sands, which in my opinion, is the United States' security blanket in terms of oil.”

If crude-oil prices jump during the next 12 to 18 months, oil sands will be in high demand, Licata says. “Canada’s currency to me is one of most compelling ones out there.”

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The faltering global economic recovery will send gold prices higher, with the precious metal reaching $1,375 an ounce, says commodities expert John Licata. The Federal Reserve s decision to expand its quantitative easing through bond purchases confirms his view, Licata,...
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2010-07-13
Friday, 13 Aug 2010 01:07 PM
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