Socgen sees weaker gold price in H2 2004 Monday February 2, 7:43 am ET
LONDON, Feb 2 (Reuters) - Gold will continue look to the dollar for direction, but a forecast turnaround in the U.S. currency in mid-2004 could push gold prices lower as investors flee the market, Societe Generale said on Monday. In its quarterly commodity review, the bank said the 70 percent rise in gold prices since their low of February 2001 was linked predominantly to dollar depreciation.
"The market has ignored internals and has chosen instead to focus solely on external factors," Socgen's report said.
"Yet this has increasingly come down to just one, the decline of the USD, as geopolitical concerns have eased and the economy and stock markets have rallied."
Socgen's view was for the dollar to turn decisively around the middle of this year, thus putting gold prices under pressure.
It said the only other element with potential to move prices greatly was the upcoming central bank gold sales agreement (CBGA). The five-year pact, due to expire in September, placed a ceiling on gold sales of 400 tonnes per year.
The bank expected a new CBGA to be signed with a higher ceiling of at least 2,500 tonnes over five years and with greater flexibility over annual amounts.
Socgen forecast a marginal recovery in gold jewellery fabrication in 2004 to 2,525 tonnes, after a cumulative decline of 23 percent in the three years to 2003.
It said that despite all the talk about vibrant investment demand, at the physical level, official sales of gold coins were flat and bar hoarding outside Europe and North America collapsed by 35-40 percent in 2003.
Global production of gold was forecast to decline by up to 1.5 percent in 2004 to 2,575 tonnes. Producer dehedging would continue, but at a lesser pace than the past couple of years.
Socgen forecast an average gold price (afternoon fix) of $394 an ounce in 2004 and $350 in 2005, versus an estimated $364 in 2003. Spot gold (XAU=) was quoted at $401.80 on Monday, off a recent 15-year peak of $430.50.
PLATINUM SEEN FIRM
Platinum should continue to rise, despite trading at its highest level in 24 years, due to "outstanding fundamentals".
Not only has the metal benefited from a supply deficit, but a combination of dollar depreciation and the independent strength of the (major producer) South African rand (ZAR=) also aided its seemingly inexorable rise.
"In short, platinum's chronic structural deficit could now lead to genuine shortages and producers may be unable to alleviate the situation before 2006," the report said.
"...it is hard to think of reasons for prices to weaken even from present inflated levels, and they may instead spike yet higher so as to choke off some demand."
Spot platinum was quoted at $830 an ounce on Monday morning, down from New York's previous $835 and compared with January's peak of $868
Just brings tears to my eyes. Tears of joy........LOL
