There are further gains in store for gold, analysts say, even though it is well off its six-year highs reached last month.
Dresdner Kleinwort Wasserstein precious metals strategist Kevin Crisp is recommending investors buy gold now as a short-term play, with a window of opportunity remaining before an imminent war with Iraq.
'To get ahead of what has become an incredibly short-term 'game', we believe that establishing a short-term long position now . . . will pay dividends over the next two weeks,' he said in a market comment.
Spot gold hit US$388.50 on February 5, its highest level in six years, on fears that military action against Iraq was imminent. It has since fallen back to as low as US$340 an ounce as profit-takers stepped in on temporary lulls in war jitters. Last week gold was trading between US$347-US$358.
CLSA Emerging Markets makes a long-term case for gold, and one that it claims has little to do with the war in Iraq. In a recent newsletter, CLSA regional strategist Christopher Wood reiterated his startling long-term target for a bullion price of US$3,400 per ounce. His reasoning is based on a gloomy view of the United States economy, which he believes will undergo a massive correction to its debt excesses.
CLSA technical strategist Chris Roberts has said that gold's break above an October 1999 peak of US$338 late last year took place after five years of base building and an almost 20-year bear market. To him, that suggests a short-term doubling from the bottom to US$500 an ounce.