INTERVIEW: Gold Set To Shine In First Quarter Of 2007
December 11, 2006
By Alison Guerriere Ciaccio
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Led by a weak dollar, Gold prices are expected to move higher by the end of 2006 and could hit a price target of $850 an ounce during the first quarter of the new year, according to one market analyst.
In an interview with Dow Jones Newswires, Neal Ryan, vice president and director of research at Blanchard and Company Inc., provided his take on the precious metals markets, noting that the glow from a previous shot to multi-decade highs in May hasn't faded for the precious metals group.
"With the supply and demand side of the market, there are a lot of great factors in favor of the price continuing to move up whether its less mine supply, lower central bank sales, China or Japan (interest), but right now more than anything it's a dollar-driven story," said Ryan.
He said that "as we sit and wait to see who's going to be the last person who is holding all the dollars and bolting for the exit in the Asian countries," precious metals will take the lead over the next three to four months.
For silver prices, Ryan is anticipating a strong finish for the metal in 2006 with a potential spike to $16 an ounce.
Looking into 2007, Ryan's silver price target is $18 to $20 an ounce in the first quarter.
The analyst said he agrees with market sentiment that silver has been outperforming gold recently due to its use as an industrial metal and a lack of overhang in the market.
"Central banks no longer hold it in their vaults so there are no worries that someone will come into the market and sell off 50% of their holdings," said Ryan.
In addition to that, he said, demand has been increasing for the white metal in traditional gold markets like India and China.
"We are seeing more consumption from those parts of the world where previously there hadn't been much," Ryan said. While gold is considered the "end-all, be-all" in India, silver has picked up steam.
"We've seen a lot of renewed interest in investing in it. It's one of those things that has the ability to be a currency alternative but also a consumed industrial metal," he said. "You've got the commodity and monetary dual asset where gold doesn't particularly have that."
In the platinum market, Ryan projects that in the first quarter of 2007 platinum will exceed the $1,600 an ounce level.
With platinum jousting with its current record high of $1,347 an ounce, reached in May 2006, Ryan noted the precious metal's susceptibility to rumors and speculation - most recently the talk of a planned platinum exchange-traded fund in the works.
Considering the illiquid and thin trading conditions of the platinum market, the analyst downplayed any speculation of an ETF.
"I just don't think it could happen," he said.
While price spikes will remain the norm of the precious metals markets, Ryan said periods of consolidation are needed in these markets.
"That's why when things went a little too parabolic last May we had a wicked correction and (many investors) lost interest," he said. "But current gold prices are still higher even after that pullback than it was 3 months before the spike."
-By Alison Guerriere Ciaccio, Dow Jones Newswires; 201-938-5959;
alison.guerriere@dowjones.com
(END) Dow Jones Newswires
12-11-06 0730ET
Copyright (c) 2006 Dow Jones & Company, Inc.
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