Newmont says gold to rise above $1,000 an ounce
Surging worldwide demand fuelled by China and India But one analyst calls company president’s claim ’outrageous’
SYDNEY— Newmont Mining Corp., the world’s largest producer of gold, says the price of the precious metal may rise to more than $ 1,000 ( U. S.) an ounce in the next five to seven years as demand growth driven by Asia outstrips global supply. The gold market “ is hot and it is going to get hotter,” Denverbased Newmont’s President Pierre Lassonde said in an interview on Australian Broadcasting Corp. yesterday. “ By early next year you are going to see $525 and down the road even a lot higher than that.” Gold for immediate delivery touched $ 497.02 on Nov. 25, the highest intraday price since December 1987, as Japanese investors bought bullion to hedge against inflation and jewellers in Asia and Europe stocked up. Lassonde’s prediction surpasses a Merrill Lynch & Co. forecast in July that gold may rise to $725 by 2010 because of rising demand from China.
“ When any of these markets get momentum behind them, you tend to find some pretty outrageous calls,” said Mark Pervan, head of resources research at Daiwa Securities SMBC Australia in Melbourne. “ There’s going to be a lot of gold calls made in this environment, it’s similar to the oil market about six months ago when people” predicted oil at $ 100.
Gold may top a record $873 during the next three years because the U. S. will be unable to check inflation caused by rapid growth in China and India, William Gary, a publisher of newsletters with subscribers that include hedge fund Tudor Investment Corp., forecast last month. Some investors buy gold to hedge against inflation. Gold futures surged to $873 an ounce in 1980, when U. S. consumer prices rose more than 12 per cent from the previous year. Gold last climbed above $500 an ounce on Dec. 11, 1987.
“ Everybody thinks inflation is going to stay at 2 per cent, I don’t believe it,” said Lassonde. “ There has been way too much money printing in the world for that to happen.”
Inflation will probably rise 2.4 per cent by the fourth quarter next year from this quarter, up from a 2.1 per cent gain a year earlier, a survey by the U. S. National Association for Business Economics found. Newmont said Oct. 26 thirdquarter profit fell 2.3 per cent to $ 126 million as output fell 6.8 per cent, eroding the benefit of rising gold demand and prices. Worldwide gold production last year had the largest decline in 39 years, Lassonde said. Demand in India, the world largest consumer, rose 47 per cent last fiscal year, and 14 per cent in China, the world’s fastest growing economy, he said. The decline in output will continue “ for at least another couple of years simply because the industry didn’t put money back into the ground when the gold price was very low,” Lassonde said. “ On the other side demand is just surging everywhere. It is driven mostly by Asia, China and India.” The price of gold may rise above $500 in the “ very near future,” Barrick Gold Corp. chief executive Gregory Wilkins said in Toronto Nov. 18.