LONDON (Reuters) - Gold prices hit a record at $1,578.50 an ounce on Wednesday as concern over the euro zone debt crisis deepened, and after minutes to the Federal Reserve’s June meeting suggested some members were pondering the possible need for additional easing.
Below are analyst comments:
“The recent talk by EU politicians about a Greek default has fueled the recent rally. This comes together with potential trouble for Italy, Spain etc. We are seeing good demand by retail investors for gold bars with gold playing its traditional role as safe haven.
“As long as the current situation persists — and not to forget the ongoing US debt limit discussion — I can’t see why the bullish environment for the metal shouldn’t persist for the time being.”
“You have to think that things can’t get much worse than they are for the next six months. It’s a battle between rising supply and unspectacular demand in the real world and investors having nowhere to put their money. We’ll see occasional rallies to new highs, but we would expect prices essentially to range more or less sideways through to the end of the year. The peak of the cycle is likely to come in the first half of next year.”
MICHAEL WIDMER, ANALYST, BANK OF AMERICA-MERRILL LYNCH:
“The rise is medium term from where we are standing right now. Gold will keep rising for the next five years even if it has some crests and troughs. Those holding gold should hold onto it, while others should probably get their hands on it as it is going to be on an upward trend.
“The sovereign debt crisis is helping the gold prices rise but even if it is addressed in the short-term, the developed countries are in so much debt that it will continue to drive gold up for the next 10 years.”
GNANASEKAR THIAGARAJAN, DIRECTOR, COMMTRENDZ RESEARCH, MUMBAI
“The rally is basically due to euro zone crisis. Gold priced in euro has hit a record. This says people in the euro zone have sold their euro holdings and converted it to gold. The other important factor is Federal Reserve’s statements that hinted at a possible QE3. Silver will play a catch-up now.
“Outlook is that prices could test $1,605 in the near-term or even higher to $1,645. Declines will get supported at $1,545-50 now.”
“We’ve moved above the $1550 level and we should probably see some consolidation. It is tough trying to buy at record highs, but in order for the big guys to put their money back into it, or apply additional money, they want to see how it behaves now once we’ve broken above $1550. But right now it is difficult to come up with any argument for a sale, that is for sure.
“We saw the dollar strength over last couple of days, which was primarily from the euro weakness, did not have an impact. The only impact it had was driving euro/gold to record highs. So that is not a factor either to worry about. It’s finding support from all different corners now and that will stay with us for the foreseeable future I think. Can we gain this foothold above $1550? There’s no reason we shouldn’t see $1600 fairly soon. But we are in the summer doldrums, so we could have a $50-dollar move one day move in either direction, because liquidity starting to dry out a little bit and it’s not exactly the time of year when you have a great deal of physical demand. So it will have to be the investment community that drives it.”
“I think we’re probably heading higher. Given the situation in Europe and the U.S. debt ceiling people are worried. I think it is heading for $1,700 and aiming for $2,000, but not in a hurry, just a gradual creep higher.”
“Bullish tint for the precious metals is coming from multiple fronts with Fed minutes showing biasness for more fund stimulus and debt contagion fears in EU zone. Investors are weighing which is worse amongst the two; the EUR or the USD. Markets will be closely monitoring the comments by Fed later today for any clues for QE-3.”
Reporting by Tasim Zahid, Siddesh Mayenkar, Amanda Cooper, Karen Norton and Jan Harvey; Compiled by Eric Onstad