what is driving gold?

"Iraqi Quagmire Could Push Gold Over $400/Oz In Near-Term

By Jim Hawe
Dow Jones Newswires http://sg.biz.yahoo.com/030909/15/3e138.html
Tuesday, September 9, 2003

TOKYO (Dow Jones) -- Concerned that the mounting costs
to rebuild Iraq will shackle the U.S economy for years to
come, more investors are now hedging their portfolios with
a touch of gold -- a trend that could push this traditional
safe-haven asset over $400 an ounce before long, industry
insiders said.

John H. Mesrobian, president of Virginia-based
Constantinople Advisors, sees a few different price movement
scenarios developing on the gold market.

"A close above $380 will point to a quick move to $400-plus.
Or gold will consolidate first before moving higher. In both
cases $400 is going to be breached -- and soon," he said.

Spot gold was quoted at $377.50 a troy ounce Tuesday in
Asia, up from $375.25/oz late Monday in New York.

Mesrobian, whose firm advises investors on currencies,
bonds, and commodities, said gold is being driven by
improving fundamentals and moves on the currency markets,
particularly the slumping U.S. dollar.

"The dollar is toast," he said, predicting a further slide in
2004.

Michael Kosares, the president of Denver-based bullion
brokerage Centennial Precious Metals, has seen investors
hedging their portfolios against potential losses in stocks
and bonds, as well as against a further deterioration in the
U.S. economy.

"Gold investor concerns these days are more centered
around some of the negative fallout from the war on terrorism
such as rising deficits, bond market problems and deteriorating
relations with key trading partners," said Kosares.

Kosares agrees that gold stands to benefit from a further slide
in the value of the greenback, especially if the dollar printing
presses keep rolling to finance the war on terror, which now
carries a $87 billion price tag.

Kosares said most portfolio planners are adopting long-term
strategies that account for any fallout from the efforts to
rebuild Iraq, as well as the possibility of further terrorist
acts at any time.

So is there anything else investors should be adding to their
portfolios other than gold?

Mesrobian believes the euro, Swiss Franc, and Canadian
dollar are all headed higher, and says copper deserves a
second look.

He also said shares in many junior mining companies offer
nice profit potential.

Conversely, he warns against too much exposure to the
U.S. dollar and stock markets.

"The bottom line is that the U.S. dollar and markets will
see bottoms in 2004 and it is going to be very nasty," he
said.

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