The price of gold could weaken in 2005 as movements ...
The price of gold, which reached earlier this year a 15-year peak near $430 an ounce, could weaken in 2005 as movements in the dollar grip the market tightly while its appeal as hedge against geopolitical tension fades, a leading precious metals consultant said on Tuesday, Reuters reports.
Jessica Cross, managing director of the Virtual Metals consultancy, said gold was depending too heavily on perceived weakness in the U.S. economy, continued low U.S. interest rates and predictions for a weaker dollar.
A weaker dollar makes dollar-priced gold more attractive to non-U.S. investors.
She said that if U.S. President George Bush is reelected later this year, monetary policy will tighten.
Virtual Metals estimates that gold should trade between $375.00 and $450.00 in 2004.
Gold was last quoted at $391.25 an ounce late on Tuesday.
Cross highlighted other threats to the key drivers of gold's recent rise, including a fall-off in physical offtake, the lacklustre performance of exchange-traded gold products in London and Australia and a contraction in dehedging.
Cross said geopolitical tension, normally a key driver of gold price rallies, was losing significance. "Today the world seems quite able to cope with international fears that might have driven the price up."