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Gold and commodities are only things left for currencies to depreciate against
... but too late for exactly WHOM?
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World Bank sees gold price falling, nickel strong
WASHINGTON, Sept. 3 (Reuters) -- The World Bank
forecast on Wednesday the gold price, trading around
$370 an ounce, should fall below $300 an ounce as
new, low-cost mines are started and producers slow
the rate they've been buying gold back to unwind
price protection contracts.
Gold stormed from around $250 an ounce lows last
year, reaching a 6-1/2 year high at $388.50 in February
as the U.S. dollar fell and threats of war against Iraq
But the bank said gold's rise should weaken over the
quot;Over the medium-term prices are expected to fall
below $300 an ounce as supplies from all sources
exceed demand,quot; the World Bank said in a Global
Economic Prospects report.
quot;Even below $300/oz, mine production is expected
to continue to increase moderately as new low-cost
operations come on stream,quot; it said.
The World Bank also said key for the gold price was
whether central bankers renegotiate a 1999 European
Central Bank Gold Sales Agreement to limit their gold
The agreement, which restricts some central banks to
selling only 400 tons of gold per year, expires a year
from now. Market participants have speculated it will
be renegotiated at next month's International Monetary
Fund-World Bank annual meetings in Dubai.
The bank said gold companies had been unwinding
their gold hedging programs, cutting hedge books by
4.5 million ounces in the first quarter this year.
quot;It is expected that producer dehedging will slow in the
second half of this year and in 2004, and remove
much of the support under gold prices,quot; it said.
Major gold producers have been buying back gold
and cutting their hedging programs since the price
stirred from $250 an ounce. Smaller hedge books
give producers bigger exposure to a rising gold
The World Bank was more optimistic about the
nickel price, saying it should jump significantly over
the next couple of years with no new projects on the
horizon until about 2006.
The metal hit a three-year high of $9,950 a tonne on
Tuesday but was down at $9,880 on the London Metal
Exchange on Wednesday.
The price has risen about 75 percent since October
2001 because of low stocks, strong demand from the
stainless steel industry -- the biggest user of nickel --
and tight supplies.
quot;The nickel market is expected to slip into deficit this
year and remain so in 2004 and 2005, mainly because
of a dearth of major new projects to come on stream
over this period,quot; it said.
On copper, the bank said demand outside China and
neighboring Asian countries was weak and the market
could remain in surplus for the rest of the year but slip
into a deficit in 2004 as demand picks up.
However, stronger copper prices depended on the
extent of a global economic recovery and production
cuts in Latin America and the United States, it said.
quot;The restart of idled capacity in Chile and the U.S.
could prevent prices from moving sharply higher,quot; it
Copper has cleared the key $1,800 a tonne level and
was last at $1,814 a tonne in London.
The bank forecast the aluminum market would move
into deficit in 2005 but warned of a number of
uncertainties in the near term such as the extent of
demand growth, start-ups of idled capacity and the
size of Chinese net exports.