Gold Likely to Rocket

Stephen Harris

9 March 2005

The price of gold is expected to continue rising and could reach an average of $459 an ounce in 2005, a 12 per cent rise on 2004’s mean price, according to gold guru Martin Murenbeeld. Mr Murenbeeld, who is chief economist with Dundee Wealth Management in Canada but best known as one of world experts on the price of gold, told delegates at a recent mining conference in Canada that the outlook for gold is positive. Mr Murenbeeld's bullishness on gold is primarily driven by his expectation of a further decline in the US dollar both this year and next. A decline in the dollar boosts the bullion price as the dollar-priced commodity becomes cheaper to buy in other currencies. Mr Murenbeeld says there is a negative correlation between the gold price and the dollar, so when one goes up the other goes down. This has averaged a high -0.61 since 1982. Perfect negative correlation would be equal to -1. He expects the dollar to remain under pressure for the rest of 2005 as a result of America’s huge current account deficit. On the gold supply side, Mr Murenbeeld does not see a flood of new metal coming onto the market following the renewal of pact by European central banks to cap their sales. At the same time, it is well known that mine gold output is falling. Mr Murenbeeld also said upward pressure on the price of gold is likely to come from demand for new gold exchange traded funds, which are investment products that allow private individuals to invest directly into the metal. “If you make things easier to buy, it is good for the price,” he said at the conference.