THE gold price could easily rise beyond 1400/oz as investor anxiety, central bank buying and more US quantitative easing continue, JPMorgan Asset Management fund manager Ian Henderson said yesterday.
“I just feel for the time being, the trend is your friend. There may be a correction, but despite jewellery demand perhaps being weak, that is more than offset by lack of mine supply, by central bank buying, so I don’t think 1400 is too hard a level to cross over the next six months or a year, it doesn’t sound too dramatic .”
Mr Henderson, who manages JPMorgan’s 7,5bn Natural Resources fund, said he has roughly 30% exposure to gold through gold mining companies but also invests in silver and the platinum group metals (PGMs). “I know people talk about 2000 (an ounce) and I’m prepared to say I don’t see any reason why it can’t hit 1450 and it could go anywhere. And that will drag silver up and will drag up the PGMs ,” he said.
JPMorgan’s Natural Resources fund is up about 24% so far this year, according to fund monitor MorningStar, compared with a 2,3% fall in the S&P global natural resources index.
Spot gold was down nearly 2% yesterday, to about 1342 /oz, after a surprise rate hike from China boosted the dollar and battered the commodities complex. But investor concern about global growth has pushed up the gold price by more than 22% so far this year to record highs.
One of the main driving forces behind the 16 % rise in the gold price over the past three months has been anticipation of the US Federal Reserve buying government bonds and pumping billions of fresh cash into the financial system as it strives to breathe life into the flagging economy.
This triggered a 7,4% fall in the value of the dollar against a basket of major currencies over this same period of time, which has proven beneficial to gold, as it becomes cheaper to non-US investors when the greenback drops.
Also, pressure on China is growing to allow its yuan currency to appreciate to make its exports more competitive.
That in turn would boost the dollar and could mean Beijing may resort to using its vast foreign exchange reserves to increase its official holdings of gold, which stand at about 1 054 tons, the world’s sixth largest.
“The Chinese may see quantitative easing as potentially reducing the value of their assets, so they are more inclined, I would guess, to increase the gold within their basket, which is also supportive,” Mr Henderson said. Reuters
