Gold Price Consolidates - What's Ahead for the New Year?

Source: Mineweb.com  (12/21/07)

...the portents look good for the gold price in 2008. Perhaps some of the volatility seen in the second half of 2007 may fall away, but it is notable that big gold price spikes have been seen in each of the past two years, so one can't rule out the possibility of another one next year too.


...the gold price has been drifting over the past week remaining in a very tight range above and below the $800 mark - and with the huge cutback in activity for the holiday season which has many - perhaps most - traders away from their desks, there didn't seem to be the prospect of much change from this until perhaps the second week in January, but Friday saw a move back to the $810 area. The degree of price movement overall has certainly shown a marked change from the often big daily volatility of November and the beginning of December.

But what of the New Year? What does this have in store for us?

Given our view that the gold price is very much an indicator of the perceived strength of he US dollar it is probably encouraging for the gold bulls that the current level around the $810 mark has been maintained over this period when the perception of dollar strength by markets in general has been far more positive - leading to good rises against many other major currencies. The rise against the British pound, for example, has been quite spectacular in only a matter of days as it has become apparent that the UK economy is not immune from many of the factors which have been apparent in the US in the past months. And the UK is not alone in feeling the economic backlash generated by a mixture of the financial straitjacketing derived from the subprime crisis (which is yet far from over) and the decline in the dollar making exports to the US less competitive.

This does suggest that the New Year could see a sustained rise in the gold price as the dollar weakens again because the key factor of the US's huge current account deficit won't just go away.

Speaking to Mineweb/Moneyweb radio a couple of days ago, Paul Walker, CEO of UK specialist precious metals analysts GFMS said: ".. we still think it [the gold price] is going to be heading higher over the next 12 to 18 months, and the reasons that underpin this haven't changed one iota. If nothing else, the sub-prime prices that exploded onto the international financial scene over the last few months - our view is that's still not worked through completely. "

...But, we do feel here that the path of the gold price in 2008 will be to continue upwards and the long awaited breach of the $850 mark may well come about sooner rather than later as the economic crunch continues to bite and gold's 'safe haven' attributes come back into favour...

Overall therefore, the portents look good for the gold price in 2008. Perhaps some of the volatility seen in the second half of 2007 may fall away, but it is notable that big gold price spikes have been seen in each of the past two years, so one can't rule out the possibility of another one next year too.

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