Silver''s as good as gold; short supplies set to lift prices as high as $50

Section:

It's as simple as that.

* * *

Gold at 17-Year Peak in Europe

By Clare Black
Reuters
Friday, September 16, 2005

http://today.reuters.com/business/newsarticle.aspx?
type=tnBusinessNews&storyID=nSP309551

LONDON -- Gold soared to its highest level since June 1988 in Europe
on Friday as inflation concerns, uncertainty about the U.S. economy
and robust physical demand sparked a buying spree by funds.

Traders said an absence of central bank selling over the past three
weeks as European banks had reached the limit of a sales pact, had
removed an important price cap.

Spot gold was quoted at $457.80/458.50 an ounce at 0926 GMT, from
$455.10/455.80 last quoted in New York.

"Gold is really looking good now and seems to have a clear upside
objective," said Mark Keenan, fund manager at UK-based MPC Commodity
Fund.

"You've got three of the strongest fundamental drivers of gold that
are currently converging so it is very difficult to make a bearish
case for it at the moment."

He was referring to a weak dollar, rising inflationary expectations
due to strong oil prices and the seasonal upturn in physical demand.

It was the surprising strength of demand for gold to make jewellery,
notably in the world's biggest consumer India, in the first half of
this year that triggered the latest leg up in gold's impressive
rally -- now in its fourth year.

Many analysts are looking for gold to target $500 and above next
year for the first time since 1987.

That still remains well off gold's 1980 high of $850, when it was
bought as a hedge to protect against high inflation.

"It (inflation) doesn't have the importance it had in the past. But
for a couple of weeks now, it has become a topic again on the back
of the high oil price," said Wolfgang Wrzesniok-Rossbach, head of
metals marketing at Heraeus.

"I think the discussion for gold being a hedge against rising
inflation has intensified and that could be why we are seeing buying
now, here in the Western world."

Bullion's rise has not been limited to dollar-gold. Prices have set
a record high in euros and 14-year peaks in yen. New York's COMEX
gold futures hit a 17-year high on Thursday.

"I would expect more buying certainly from the trend-following fund
community, a new high will attract a degree of momentum buying,"
MPC's Keenan said.

Some were still opting for caution, waiting to see whether the Fed
would extend its 14-month stretch of raising interest rates on Sept.
20.

Financial markets had been debating whether the U.S. central bank
would continue to raise interest rates after the hurricane.

"I think that one of the main keys to the market's direction over
the coming months will come from next week's FOMC meetings," said
Simon Weeks, director precious metals at ScotiaMocatta.

"And on this basis people are unlikely to turn major buyers until
the outcome of these meetings and their associated impact on
interest rates and the economic picture are known."

Silver rose to $7.06/7.09 an ounce from $7.01/7.04 last quoted in
New York. Platinum fell to $914/917 an ounce from $916/920, while
palladium was steady at $184/187.

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