ASIA
Clashes between US, China and Iran may account for record gold prices
by Maurizio d'Orlando
The gold metal is commanding its highest rate in 25 years. Apart from political motives, it could well be acquisitions by private enterprises in India and China, or international investment funds, which are pushing prices up.
Milan (AsiaNews) – Oil prices rose to over 725 dollars an ounce in yesterday’s bargaining. This is the highest quotation in 25 years. Currently, the quoted price stands at 726 dollars.
Apart from those who maintain that the increase in prices is a bubble destined to burst or, at least, to deflate with time – definitely, gold has very limited technical uses – the cause of the record high is generally thought to lie in the growing demand on the part of private enterprises in India and in China, or in politics. The
rising quoted prices are thought to be linked to tension between the United States and Iran because of Iranian nuclear programmes or to Chinese operations.The recent increase could well be linked to a decision by China’s monetary authorities to increment their reserves of the yellow metal. According to several sources, China – its Central Bank has about 600 tons of gold – will shortly aim to hold up to 5% of its currency reserves in gold. This proposal means a volume of around 2,400 tons acquired by China, circa two-thirds of annual global production. The reasons for this diversification would be political, that is, linked to hidden differences with the United States, as well as purely economical, owing to the fact that China is currently one of the countries with the largest financial liquidity reserves in the world, held mainly in dollars. From a strictly economical viewpoint, protecting Chinese currency reserves from the weakness of the dollar could be considered to be a wholly understandable move. In fact, it must be noted that the American Federal Reserve increased the interest rate a few days ago, without any resulting benefit for the dollar exchange rate.
Other observers said that now even private enterprises in China, as in India, can buy gold. India is a country with a rural population that has always trusted gold, rather than banks, with its savings. Even before the liberalization of possession of gold by private owners, in India, historically, the dowry of young brides in peasant villages used to consist of bracelets and necklaces of gold. Given the notorious precariousness of the domestic banking system in China, it is logical to suppose that private enterprises in China may want to hold some of their savings in gold.
Other observers have said the increase in prices is down to the acquisition in investment funds, in search for alternative solutions to counter risks linked to inflation and the possible collapse of world stock exchanges, especially American and European ones.
Others still say that circulation of paper money has been at unsustainable levels for some time now. They claim that not only in western countries, but also in the rest of the world, finance, at least in the short-term will upset every aspect of economy, production and even social and personal life.
Should any of these speculations turn out to be true, the next stage of oil prices could be not 800 but 1,800 dollars per ounce, and at the same time, we could see crude oil selling for 200 dollars a barrel.
Platinum, gold prices conquer new peaks
By Atul Prakash Fri May 12, 11:22 AM ET
LONDON (Reuters) - Platinum prices extended sharp gains to set a new record high on a positive supply-demand outlook and dollar weakness on Friday, while gold surged to a fresh 26-year peak on strong investor interest.
Prices fell in late trade as many investors decided to leave the market to pocket profits, but dollar weakness kept sentiment positive, dealers said.
Prices of platinum, mainly used in jewelry and in car exhaust systems, were seen volatile ahead of the Platinum Week event starting in London on Monday and the release of an industry report by Johnson Matthey, the world's top platinum distributor.
"There is more fundamental justification for platinum. We believe that even at these high prices, the platinum market is in deficit at the moment," said John Reade, analyst at UBS Investment Bank.
China witnessed good consumer demand in the last few months and generally users, rather than speculators and investors, had been buying the metal, he said.
Platinum reached a record high of $1,334 an ounce before easing to $1,320/1,328 by 1446 GMT, against $1,291/1,298 in New York late on Thursday.
The platinum market was in deficit for the seventh year in a row in 2005 as robust demand from the automobile sector negated a consumption drop in the jewelry market.
The price has jumped 58 percent in the past 12 months, and added more than $150, or 13 percent, in the past seven days.
"No matter how high platinum goes, there is demand to buy it from end-users, especially from car makers," said Akira Doi, director at Daiichi Commodities.
Johnson Matthey will present its views on the market balance and price trends in its report due for release at 1200 GMT on Monday.
GOLD GAINS
Gold surged to a new 26-year high of $730.00 an ounce before falling to $716.30/717.30, against $721.60/722.60 in New York.
It hit a record high of $850 in January 1980. Adjusted for inflation that would equate to about $1,500 now.
"We are targeting gold to reach $800 in 2007, but significant weakness in the dollar could deliver that level as early as the third quarter of 2006," J.P. Morgan said in a report.J.P. Morgan lifted its forecast for gold prices to $669 in 2006 and $756 in 2007 from $566 and $609 respectively.
Gold has risen 40 percent this year and 70 percent in the past 12 months as investors diversify into precious metals as a hedge against global tensions, including those over U.S.- Iran relations, high oil prices and dollar instability.
The U.S. currency fell on Friday, making dollar-priced gold cheaper for holders of other currencies and prompting some investors to shift to commodities.
But some analysts said the metal was vulnerable to a sharp sell-off.
"There is now clearly a bubble around the gold market and the latest moves cry for a powerful correction at some stage," said Wolfgang Wrzesniok-Rossbach, head of precious metals marketing at Germany's Heraeus.
In other precious metals, palladium rose to a four-year high of $406 an ounce and was last at $397/402, against $395/400 in New York.
Silver rose as high as $15.05 an ounce, near a 25-year high of $15.17 reached on Thursday, before falling to $14.26. It was last quoted at $14.38/14.48, versus $14.94/15.04.
(Additional reporting by Chikafumi Hodo in Tokyo)
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