Money and Metals

Reuters reports on a new prediction for gold. "Gold prices may reach almost $600 an ounce by the end of the year on supply worries, firming jewellery demand, geo-political concerns and favourable currency environment, J.P. Morgan Securities said in a report on Monday. Prices might even jump to $800 from $556 now, if Iran's nuclear issue heated up and oil hit $100 a barrel, it said. Oil prices are currently ruling at around $68."

"'For gold, event risks are surfacing at a time when mining supply was already inadequate and jewellery demand firming. Fundamentals alone justify prices near $600 by year-end, while a meltdown in Iran/spike in crude could see $800 gold,' it said."

"'Iran situation remains fluid and unlikely to be resolved soon. This backdrop is supportive of precious metals and energy, but leaves base metals somewhat vulnerable,' the report said. The report said the market needed both mine supply and considerable amounts of other sources of supply such as sales by central banks and investors to achieve balance."

"By 2007, non-mine supply would be needed to be half of mine supply to balance the market, considering growth rates in jewellery demand, the report said. 'In our opinion, there is a zero percent possibility of mines achieving 50 percent production growth by 2008,' it said."

"The reports said gold was likely to gain from a favourable currency environment, with the dollar seen range-bound in the first half of the current year, while weakening later. A weak U.S. currency makes dollar-priced gold cheaper for holders of other currencies and lifts gold demand."

"Gold reserves with central banks and the International Monetary Fund total around 31,000 tonnes. In some European countries, gold accounts for half of their reserves, while in the U.S., the world's biggest holder, it makes up 64 percent."