Tags: Expert: | $2 | 000 | Gold | Coming?

Expert: $2,000 Gold Coming?

Tuesday, 18 April 2006 12:00 AM

The man who correctly predicted the Dot-Com bust of 1999-2000 says that gold can go higher – much higher.

How about more than three times the price gold is trading at right now?

"Gold will go dramatically higher. It's still early," Peter Schiff, chief executive of Euro Pacific Capital, a brokerage based in Newport Beach, Calif., tells Reuters.

That should leave giddy gold owners even giddier, if that's possible. The metal broached the $600-per-ounce mark last week and, with inflation still looming on the horizon and scaring the pants off both investors and the Federal Reserve, it could be poised to hit $800 or higher.

"Money is continuing to gather toward gold as a hedge against inflation," Ro Seung Hwan, assistant manager at Tong Yang Futures Trading Co.'s international business team in Seoul, told Bloomberg news service.

"Inflation is getting worse because of rising oil prices. It's come to a point where it's weighing on consumer prices."

"Will [gold] reach $800?" asks Schiff. "Yes. $1,000? Yes. $2,000? Yes. It has nowhere to go but up, but it depends on how far the dollar and other currencies will be devalued."

If Schiff is right – as he was back in 1999 when he told his clients to get out of the Dot-Com market, going on CNBC to tell viewers the same thing – then there is still plenty of room for growth in the gold market.

Schiff isn't alone. Peter Spina, founder of the Web site goldseek.com, says that while a short-term correction is due, long-term prospects are excellent. "Long-term, fundamentals for gold are more as an investment vehicle." Spina thinks that gold will hit $800 within the next two years and that it could reach $1,000.

But what's the best buy? Investors seem torn between buying stock in gold-mining companies and owning gold bullion outright. Or is exploration the path to take?

Reuters claims that gold-mining companies may be lagging.

"Big gold-miners, like Newmont Mining and Barrick Gold, have failed to see their share prices keep pace with the steady rise in gold," says the newswire. "Instead, investors are flocking to smaller, so-called 'junior' gold companies that are involved in exploration."

Schiff thinks it's high time that gold has its time in the limelight.

"I have been buying gold for six years and have no intention of slowing down now. I don't think the explosion (in price) really reflects what is happening with paper currencies. Currencies are losing value and will continue to do so at a rapid pace," he tells Reuters.

The Empire State Manufacturing index – the New York Federal Reserve Bank's gauge for the state's manufacturing activity – plummeted sharply this month, indicating the lowest level since October of last year.

The index's decline from 29 in March to 15.8 in April was larger than anticipated, as economists had forecast a fall to only 24.5.

"The New York factory index is primarily used by economists to get an early read on the national Institute for Supply Management factory activity survey," according to MarketWatch.

Despite the news, the New York Fed insisted that business conditions for the state's manufacturers remained positive and they predicted improvement in activity over the next six months.

Meanwhile, while activity slowed, prices continued to advance.

"The prices-received index moved to a reading of 14.52 in April from 12.82 in March, suggesting manufacturers were able to pass slightly higher costs on to customers. The prices paid index came in at 37.90 in April versus a revised 39.32 in March," MarketWatch reported.

Based on recent comments from various members of the Federal Reserve, they must be encouraged by today's slightly softer-than-expected data.

Economists have become increasingly worried about the pace at which global demand has emerged, and many believe that the inflation genie may have escaped from its bottle.

That would mean a higher cost of money in most nations. Today's data is encouraging news at the margin for the Federal Reserve.

As market watchers awaited economic data to forecast inflation and the U.S. economy overall, the dollar traded much lower today.

Against the yen, the U.S. currency fell the most it has in a month, while against the euro, it dropped to its lowest level in two weeks.

"But the greenback pared some gains after a Treasury Department report showed net foreign capital inflows into the United States increased to $86.9 billion in February, the largest purchases since November," according to MarketWatch.

On the year, the dollar has dropped about 3.4% against the euro and .05% versus the yen, "as investors anticipate that the Federal Reserve nearing the end of interest rates rate increases, while the European Central Bank will continue to boost lending costs," says Bloomberg News.

"The Bank of Japan may also lift borrowing costs from near zero percent later this year."

According to Bloomberg News, Chinese President Hu Jintao said yesterday that his country's economy had grown 10.2% during the first quarter – a rise from 9.9% at the end of 2005.

This announcement was higher than most forecasts – as the median estimate had been 9.6%.

News of the acceleration sent copper to a record high, doubling in price from a year ago, as the metal for May delivery "rose 8.95 cents, or 3.2%, to $2.905 a pound at 9:01 a.m. on the Comex division of the New York Mercantile Exchange, after earlier reaching a record $2.935 a pound. Prices are up 42% this year," says Bloomberg.

China is the world's largest copper user, and demand in that country is expected to jump from 2.45 million tons this year to 3.35 million in 2010, the news service reports. The metal is used in the construction of vital power grids, cables and wires.

"Power plants in China, the biggest electricity user after the U.S., are increasing capacity to supply the expanding economy," Bloomberg reports.

According to one Chinese source, the country's copper demand could "increase 8% to 3.9 million tons this year, exceeding production by 1.05 million tons."

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The man who correctly predicted the Dot-Com bust of 1999-2000 says that gold can go higher - much higher. How about more than three times the price gold is trading at right now? "Gold will go dramatically higher. It's still early," Peter Schiff, chief executive of Euro...
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Tuesday, 18 April 2006 12:00 AM
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