The momentum in the gold price continues and the gold market seems set for a sustained positive cycle, world number three gold miner AngloGold Ashanti said on Friday.
On Friday morning, gold climbed to $682,15 a troy ounce — its highest level since October 1980 when gold fixed at a high of $690/oz. The metal was last quoted at $681,30/oz, up $1,85/oz from the previous close.
“Besides favourable circumstances particular to gold, the metal was most certainly buoyed by continued investment flows in to commodities in general. This is reflected in part in the high price correlation in the second-half of 2005 between gold and other metals, including zinc, silver, lead and copper,” AngloGold Ashanti said.
“Investor interest in commodities is reflected in the continued growth in several major commodity funds, and this investment interest has translated into record spot prices in metals such as copper, supported by continued physical demand,” the group added.
During the March quarter, the price relationship between gold and silver broke down, to the extent that the silver price has risen significantly more sharply than even the favourable movement in gold.
“This move in silver has been driven by the anticipation amongst investors and speculators of the launch of an exchange traded fund in silver, which is likely to have a material positive impact on demand for silver, and a related favourable impact on the silver price,” AngloGold Ashanti said.
“Whilst investment flows into gold exchange traded funds early in the quarter kept the gold price firm, trade in these gold funds was much quieter during the latter part of the quarter,” the company said.
Stronger prices for silver were likely to be helpful for gold, AngloGold Ashanti said.
“The interruption in the correlation between the US dollar spot price of gold and the US dollar exchange rate against the euro has continued,” the company said.
“Market commentators refer frequently to changes in the US dollar/euro exchange rate to justify movements in gold price, but it is difficult to sustain an argument for effective correlation between the markets. During the nine months since mid-2005, when the price behaviour of the two markets began to diverge, the gold price has moved strongly upwards by almost 60%, whilst the dollar has remained in a band of six cents to seven cents or 5% against the euro,” AngloGold Ashanti said.
The physical demand for gold during the final quarter of 2005 and the first quarter of 2006 had fallen in the face of sharply higher spot gold prices.
“This is particularly so in the jewellery sector and in those markets such as India where margins are low and retail prices are close to the underlying gold spot price,” AngloGold Ashanti said. – I-Net Bridge