Gold price rally to come to an end

09/23/05 - newratings.com

LONDON, September 23 (newratings.com) – The price of gold fell on Thursday from a 17-year high. Gold futures for December delivery fell 0.5% to $470.30 per ounce in New York on Thursday. Canadian stocks fell on Thursday, as the share price of gold miners, such as Barrick Gold Corp (ABX.TO), fell with the drop in the price of the bullion.

According to Reuters, gold futures reached an 18-year high at market close on Wednesday, driven by investment buying and robust demand. The recent rally in the gold prices was supported by the uncertainty surrounding the US economy and currency movements, Reuters added.

Analysts at UBS believe, however, that the rally in the gold prices would come to end in the short term. UBS said that central banks in Europe have temporarily stopped selling gold due to quotas being exhausted and that the banks would resume selling gold from September 27. UBS believes that the recent rally in gold prices in US dollar terms is likely to have been driven by the weakening correlation between the US dollar and gold prices. According to UBS, the price of gold would average $430/oz this year and $455/oz in 2006. UBS added that gold prices would go up to $500/oz at some point over the next twelve months.

According to AFX News, senior dealer at CMC Markets, James Foulsham, said that gold stocks rallied back on Thursday evening, following a marginal correction, since investors believe that the marginal decline in the gold prices on Thursday morning was temporary. Foulsham added that the market expects gold prices to reach US$500 per ounce.