markettrend766
21-09-2008, 06:30 AM
Gold may return to $1,000 an ounce as the global financial crisis highlights investors' need for a haven from risk.
Bullion prices are now just over $850 an ounce and looks well supported by limitations to supply and firm demand from investors and jewelers.
Rallying gold prices have so far largely shrugged off attempts by governments and central banks to restore stability to the financial markets, as investors expect further problems.
A recovery in equities and the dollar after US officials said they were discussing plans to stabilize financial markets knocked gold down 2 percent on Friday after a week of huge gains. But prices quickly bounced back above $850.
With risk aversion rampant, mine supply tight, central bank selling low and physical demand emerging on dips, analysts say any price falls are likely to be short lived.
"Such a big move as we had could be corrected," said Commerzbank analyst Eugen Weinberg. "But this correction will be used by many as a chance to buy again, because the crisis of trust in the financial system is far from over."
"Market participants are still concerned, and that is why demand for gold will stay high."
Gold prices posted their largest ever rally in dollar terms on Wednesday as the US market plunged on fears of further problems among Wall Street investment banks, after Lehman Brothers sought bankruptcy protection on Monday.
Subsequent heavy losses among banking stocks and doubts over the government's bailout of US insurance group AIG exacerbated fears over the outlook for the financial sector.
The resulting panic sparked a flight to safety that at one point pushed gold up more than $140 from last Friday's nominal close, but analysts expected any positive news on the outlook for the financial sector to lead to a fall in prices.
Bullion prices are now just over $850 an ounce and looks well supported by limitations to supply and firm demand from investors and jewelers.
Rallying gold prices have so far largely shrugged off attempts by governments and central banks to restore stability to the financial markets, as investors expect further problems.
A recovery in equities and the dollar after US officials said they were discussing plans to stabilize financial markets knocked gold down 2 percent on Friday after a week of huge gains. But prices quickly bounced back above $850.
With risk aversion rampant, mine supply tight, central bank selling low and physical demand emerging on dips, analysts say any price falls are likely to be short lived.
"Such a big move as we had could be corrected," said Commerzbank analyst Eugen Weinberg. "But this correction will be used by many as a chance to buy again, because the crisis of trust in the financial system is far from over."
"Market participants are still concerned, and that is why demand for gold will stay high."
Gold prices posted their largest ever rally in dollar terms on Wednesday as the US market plunged on fears of further problems among Wall Street investment banks, after Lehman Brothers sought bankruptcy protection on Monday.
Subsequent heavy losses among banking stocks and doubts over the government's bailout of US insurance group AIG exacerbated fears over the outlook for the financial sector.
The resulting panic sparked a flight to safety that at one point pushed gold up more than $140 from last Friday's nominal close, but analysts expected any positive news on the outlook for the financial sector to lead to a fall in prices.