Blanchard and Company, Inc. sees five factors driving gold higher in the coming
months.
Crude oil is one of many indicators Blanchard and Company, Inc. analysts watch
to formulate gold price projections. While oil isn’t the only indicator of what to expect from gold, historically it has been a reliable one. As these charts
demonstrate, despite the healthy gains to date for gold, it is lagging behind relative to crude. Barring a significant drop in oil prices, this ratio suggests a huge upside potential for gold — around $1,100 an ounce.
Blanchard and Company, Inc. sees five factors driving gold higher in the coming months.
Based on research compiled by Blanchard and Company, Inc. Chairman
and CEO Donald W. Doyle, Jr. and Neal Ryan, VP and Director of Economic Research,
we see gold’s ascent continuing due to:
- U.S. and global macroeconomics — Ongoing inflationary pressures, the massive U.S. trade deficit, and the move away from the dollar as the global reserve currency will all work in favor of higher gold prices.
- Chinese and Asian markets — Gold ownership for Chinese citizens was legalized in 2004. Once a system for
selling bullion to the largest population in the world is up and running, the effect on gold demand will be staggering. Meanwhile India, already the world’s largest gold purchasing country, is experiencing an 80% growth in gold investment
following a loosening of trade restrictions.
- Central bank sales and producer dehedging — Slowing central bank sales and the reduction of hedge positions
by producers (dehedging) are creating a solid floor price for gold.
- Gold mining production — Nearly every major gold producer missed their production targets in the second quarter of
2005. As a result of mine strikes and increasing production costs, global production is continuing to sag.
- Investment demand — The World Gold Council reported a 66% rise in gold demand in the first and second quarters
of 2005 compared to the same period in 2004.
