Doug Casey: Gold reconsidered (with mention of GATA and James Turk)

Section:

By John Parry and Zachary Howard
Reuters
Tuesday, June 7, 2005

http://www.reuters.com/financeQuoteCompanyNewsArticle.jhtml?
duid=mtfh28423_2005-06-07_17-53-14_n07443397_newsml

NEW YORK -- Gold prices may be about to benefit from both volatility
in and a lack of confidence in several of the world's major
currencies, with gold's price in euros a key indicator, analysts
said.

Gold, as a classic hedge against global investors' worries about
inflation or geopolitical instability, was a beneficiary of the
dollar's three-year decline through the end of 2004.

Gold is priced on international bullion markets in dollars, and the
precious metal has a tight inverse price correlation with the U.S.
currency.

The dollar has rallied so far in 2005, lifted mainly by rising U.S.
interest rates, and gold prices in dollar terms have fallen by 3.2
percent.

This month, however, gold prices have begun to rebound, even
although the dollar has remained strong, and with the euro down more
than 9 percent this year, some analysts are tracking the price of
gold in euros as an indicator of demand for hard assets.

On Tuesday, spot gold was trading at around $425 per ounce and gold
in euros was at 346.40.

"If gold breaks above 350 euros per ounce, that will signify the
market is shunning all paper currencies", said Jes Black, hedge fund
manager, with Black Flag Capital Partners LLC, Hoboken, New Jersey.

If gold were to rise above that level "what you would see is a mad
rush into gold. ... It could very well spark a very large rally in
gold," Black said.

The euro has come under under pressure this month after both France
and the Netherlands voted against the proposed EU constitution in
referendums.

Between 350 and 355 euros per ounce, an area touched several times
in the last three years, "is a very, very big resistance level,"
which, if broken, "would institute a good trading opportunity," said
Jordan Kotick, global head of technical analysis with Barclays
Capital in New York.

Paul McLeod, vice president of precious metals at Commerzbank in New
York, said he felt an initial break above 350 euros would not
necessarily prove decisive, because resistance there was so strong.

In recent years "gold has come a long way in U.S. dollar terms, but
it has been in a relatively narrow range in euro terms between 300
and 350," he said.

"I don't believe it's a breakout until we have a couple days solidly
above 350, in which case my view would change and maybe we do have
some good upside technical developments taking place," McLeod added.

Any sustained rise of gold above 350 euros might be the precursor of
gold climbing significantly against the dollar also, especially if
$450 is breached, currency analysts say.

In dollar terms, "the key range highs are not till $450 to $455,
that is still 20-plus dollars away," said Kotick.

Meanwhile, the dollar remains strong, supported by higher interest
rates in the U.S. than in Europe or Japan.

But Asian currencies could attract some investment if China revalues
the yuan, removing its peg to the dollar, and a weaker dollar would
again provide support for gold prices.

"Gold is starting to firm up against all the currencies.
Technically, that is looking very good," said one metals broker at a
futures commission merchant. "Keep an eye on gold at above 350 in
euro terms," he said.

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