James Turk: 70% chance that gold will break $430 by year-end

Section:

Gold closes at 6-month high,
up $3 for the week as weak jobs data hurts dollar

By Myra P. Saefong
CBS.MarketWatch.com
Friday, October 8, 2004

http://cbs.marketwatch.com/news/story.asp?guid=%7BB65D0BD4%2D7F10%
2D45AA%2DB628%2D79DEAE2CA4B3%7D&siteid=mktw

SAN FRANCISCO -- Gold futures closed near $425 an
ounce Friday to close at their highest level in six
months, gaining more than $3 for the week, as a
weaker than expected U.S. jobs report fueled a steep
drop in the dollar.

"[The] weaker job-growth than forecast, combined with
falling consumer confidence, runaway energy prices,
and constant geopolitical tensions worldwide, have
given gold all the ingredients necessary for a run to
new highs in the coming days and weeks," said Peter
Grandich, editor of The Grandich Letter, an investment
advisory publication.

Data on U.S. employment Friday showed that the
economy added fewer jobs than expected in September.

The news sent the dollar reeling and that, in turn, sent
more investors to gold as a hedge against financial losses.

Against this backdrop, gold for December delivery climbed
$5 to close at $424.50 an ounce on the New York
Mercantile Exchange after peaking at $426. It hasn't closed
at a level this high since April 7. Last Friday gold closed
at $421.20.

"Ahead of the U.S. election, we would not be surprised if
some moderate asset reallocation out from U.S.
dollar-denominated assets into euro-denominated assets
would occur," said Frederic Panizzutti, an analyst at MKS
Finance in Geneva. "Any such move would ... result in a
somewhat temporary stronger euro, and ultimately help
gold to strengthen."

"Gold is rather poised to play one more time its short-term
safe haven role," he said. "New highs seem fairly possible
in October."

Kevin Kerr, a senior trader at Kwest International, believes
the next target for gold is $428. The contract peaked at an
intraday level of $436.50 on April 1 -- that was the highest
futures level in about 15 years.

But Dale Doelling, a chief market commentator at
Bullion.com, warned, "Volatility is off the charts, so we'll
need to watch gold closely here."

"If the market can hold these levels, then new highs will
likely be made soon. If they can't, we could see gold
move lower very quickly," he said.

"Gold is also getting a boost form the rest of the metals
complex, including industrial metals like copper," said
Kerr.

December copper climbed 4.2 cents to close at $1.4695
a pound. Futures prices for the metal have been trading
at levels not seen in the futures market since 1995. It's
up almost 5 percent for the week.

Silver, which is both a precious and industrial metal,
tacked on 7.8 cents to end at $7.295 an ounce, trading at
levels not see since mid-March. It's also up about 5
percent from last Friday.

"There's a deficit in the world of copper coming on stream,"
said Frank Holmes, chief investment officer at U.S. Global
Investors. "There are no new mines basically to 2008 of
any substance that can put a dent in commodity prices."

"Copper is very volatile here and could run to $1.60, and it
could fall back to $1.20," he said. "It's not going to fall back
unless you have a huge global economic slowdown, where
copper would be under $1 a pound because there are no
inventories -- there's a deficit."

Tracking inventories, copper supplies were down 249 short
tons at 47,475 short tons late Thursday, according to
Nymex.

Silver stocks were unchanged at 107 million troy ounces,
while gold inventories stood at 5.12 million troy ounces,
also flat from the previous session.

Elsewhere in the metals market, December palladium
closed at $234.45 an ounce, up $1, while the January
platinum contract rose $4.70 to end the day at $843 an
ounce.

In equities, major metals mining indexes closed higher,
mirroring strength in the metals futures.

"Believing higher gold prices are in the cards, mining
shares should be among the groups seeing positive
money flows for the foreseeable future," said Grandich.

The Philadelphia Gold and Silver Index rose 2.1 percent
to close at 104.26 points, its highest level since early
April. It's up 3.2 percent for the week.

The CBOE Gold Index added 2.6 percent to end at
95.16 points, a level not seen since January. It's up
from last week's close of 91.5.

The Amex Gold Bugs Index closed at 237.44 points,
up 2.6 percent. It hasn't traded at levels this high since
mid-February and it's up 3.5 percent for the week.

Top copper stocks, including Freeport-McMoRan
Copper & Gold, shot up Friday in line with strength
in copper.

Meanwhile, shares of Alcoa Inc. closed lower after
the aluminum producer reported a slim 1 percent
improvement in third-quarter profit.

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