By Atul Prakash
LONDON (Reuters) - The market fundamentals and macroeconomic factors that lifted gold's price more than 25 percent this year will drive it still higher in 2006, analysts say.
Leading research houses and investment banks have raised their price forecasts saying market basics, economic growth and inflation and gold's classic safe-haven role could attract more players into the market.
J.P. Morgan Securities have lifted its long-term gold price forecast to $500 an ounce from $450, with an average price of $558 in 2006 and $609 in 2007, while Merrill Lynch upgraded its 2006 estimate by 19 percent to $525 an ounce.
Most of the forecasts suggest average prices in the next year above $500, nearly double the level about five years ago.
"I don't see any reason why this interest in gold will go away," said Stephen Briggs, economist at SG Corporate and Investment Banking, which forecast average prices at $515 in 2006 and $550 an ounce in 2007.
"And this is against reasonably robust fundamental picture of sluggish supply, strong physical demand and the insistence of the market that the story on central banks is a positive one."
Last week, spot gold surged to $540.90 an ounce -- the highest level in nearly a quarter of a century, but slipped by more than 7 percent since then mainly on profit booking.
The market was abuzz this month with talk that some central banks planned to add gold to their reserves.
"There is no guarantee that there will be buyers, but the point is that the market thinks and hopes that they will and that's just the sort of bullish spin, even if it is against the actual fact," Briggs said.
Others also echoed the sentiment.
"If India, China and Japan are going to increase their reserves to a meaningful level for forex diversification, they will need at least around 4 to 5 years of mine production. The gold market is so small to allow for that," said Yingxi Yu, precious metals analyst at Barclays Capital.
MACROECONOMIC FACTORS
Dealers and analysts say that worries about inflation on the back of higher crude oil prices and concerns about U.S. economic growth, along with an unstable dollar, have boosted gold prices and the same factors would play a crucial role in 2006.
"People are still having worries about the economy and inflation. They still feel they want to have gold," said Simon Weeks, director of precious metals at ScotiaMocatta.
Analysts said the dollar was likely to weaken in 2006 and that should provide further boost to the metal.
"If the U.S. dollar happens to weaken then that would be good for gold probably, (although) gold has been dancing to its own tune recently so it doesn't necessarily follow," said Paul Merrick, analyst at RBC Capital Markets, who saw average gold price for 2006 between $540 and $550.
Gold generally rises with a drop in the dollar as the metal becomes cheaper for other currency holders. But the traditional inverse relationship has been broken in the past several weeks.
"We are now in a situation really where investor interest is so much that gold can benefit if the dollar declines, but it doesn't suffer particularly if the dollar strengthens," Briggs said.
Analysts said it was the positive sentiment generated by bullish comments by industry experts at different forums that had been helping the metal, and positive fundamental factors also helped.
"There is a lot of post-rationalisation by people who already hold long positions in gold and are hoping to drive prices higher, but this will continue to boost investor interest in gold," said Yingxi of Barclays.
Consumers are becoming more and more accustomed to higher gold prices and as a result, it's difficult to be aggressively bearish on gold, said Alan Williamson, head of commodity research at HSBC Bank.
INFLATION A WORRY?
Analysts said inflation was not an issue for most of the financial markets and was likely to remain subdued in 2006, but the gold market believed that it was a concern.
"So it doesn't matter really whether it is or it isn't, the gold market has decided it is an issue," Briggs said.
Gold had positive fundamentals, with global gold output to remain static for the next year before starting a slow decline because of lower ore grades at key mines.
"We remain bullish on gold over the medium to long term and believe that the arguments for gold outweigh the arguments against," Merrill Lynch said in its latest global commodity price review.
"Our thesis through the year has been that gold is in a longer-term uptrend based on a capping of supply from the mines in a combination with the prospect of an escalation in the evolution of the Chinese luxury goods cycle and jewellery purchases," J.P. Morgan said.
Wednesday, December 21, 2005
Sunday, December 18, 2005
Coin the debate, get rid of paper
By MARK TRAHANT
SEATTLE POST-INTELLIGENCER EDITORIAL PAGE EDITOR
I have favorite vending machines. Sure, I'm eager for a cup of coffee, stamps or such, but the real reason why I favor certain machines is because I know they will give me dollar coins as change.
I am fond of the Susan B. Anthony and Sacagawea dollars. I think they're handy to carry and use. I only wish the coins were universal.
(I wonder if the newspaper business would be different these days if this country had switched away from paper dollars to coins years ago. Newspaper circulation numbers might not be any better but our revenue picture would be higher. Some of us wouldn't think much about exchanging a single coin for a newspaper.)
I have to wonder if this country has trouble with female images on its coins. Lady Liberty was circulated on nearly every coin before 1909 but she was gradually replaced by images of former presidents.
Then in 1978, the Susan B. Anthony coin was minted -- but that venture did not last long; the U.S. Mint produced fewer than a million coins.
Critics didn't like the Susan B. Anthony coin -- some said it was because of its size (bigger than a quarter, smaller than a fifty-cent piece) and others because of its political message. Whatever the reason, the United States gave up on the Susan B. Anthony dollar. Now almost 10 years ago Congress approved a new golden dollar coin, the Sacagawea.
The country was supposed to have learned from its dollar mistakes: The coin's size wasn't good for vending machines (an argument we now know was baloney) and it was too easily confused with a quarter. The new coin was larger and golden.
But the biggest mistake with the Susan B. Anthony coin was repeated with the Sacagawea. The only way to make these coin dollars work was to get rid of their paper counterparts. That's something that Congress was unwilling to do (even though the U.S. Mint estimated a potential savings of $500 million.)
Last week Congress approved new coins, a dollar honoring former presidents and a $10 honoring the former presidents' wives. (I wonder if Congress has thought through the potential of someday needing Bill and Hillary Clinton coins -- these could need to be issued twice, once as president, then again as a "wife.")
"An easy-to-use $1 coin will help bring much-needed efficiencies to the millions of low-dollar transactions that occur each day in our country. By making these exchanges more efficient with an easy-to-use $1 coin, businesses and consumers stand to reap enormous savings," said Sen. John Sununu in a press release. "In addition to its economic benefits, the $1 coin is a valuable educational tool -- much like the 50-state quarter series -- that will help inspire interest in the history of the leaders of our country."
The state quarters are popular. It's fun to collect them -- and see a new one when it rolls into circulation. But the state quarters don't compete with paper -- and that makes all the difference.
The new dollar act requires the federal government to give out the new currency as change, but makes no pretense of replacing the paper dollar. Instead it says the Sacagawea, Susan B. Anthony and new presidential coins will supplement each other.
Why can't we just get rid of the paper buck? It might be annoying for a time -- even a year or two. But we will all eventually get used to coins as dollars. That's certainly the case in Canada.
The coin debate is a symbol for American governance right now. Congress can't make hard decisions: It knows that dollar coins will save the country money but does not want to infuriate those who love the paper. Congress says do both. We, the country, can have it all.
The end result is we won't save money and will still infuriate those who champion their favorite monetary unit.
And what's with this business with more former presidents? Don't they already get enough attention?
Here's what I would do: Scrap the paper dollar, keep Susan B. and Sacajawea. Then I would add to the golden coin more names, honoring people who make America, America. I have a long list of nominees: What about coins for Ella Fitzgerald, Ray Charles or Louis Armstrong? Why not Caesar Chavez, Martin Luther King Jr. or Vine Deloria? Or what about World War II veterans like Fred Korematsu? Or Sojourner Truth, Wilma Mankiller or Eleanor Roosevelt?
Instead of the Clintons, Eleanor Roosvelt would make a great first, second coin figure. Better yet, she should be the only figure to grace a $2 coin.
SEATTLE POST-INTELLIGENCER EDITORIAL PAGE EDITOR
I have favorite vending machines. Sure, I'm eager for a cup of coffee, stamps or such, but the real reason why I favor certain machines is because I know they will give me dollar coins as change.
I am fond of the Susan B. Anthony and Sacagawea dollars. I think they're handy to carry and use. I only wish the coins were universal.
(I wonder if the newspaper business would be different these days if this country had switched away from paper dollars to coins years ago. Newspaper circulation numbers might not be any better but our revenue picture would be higher. Some of us wouldn't think much about exchanging a single coin for a newspaper.)
I have to wonder if this country has trouble with female images on its coins. Lady Liberty was circulated on nearly every coin before 1909 but she was gradually replaced by images of former presidents.
Then in 1978, the Susan B. Anthony coin was minted -- but that venture did not last long; the U.S. Mint produced fewer than a million coins.
Critics didn't like the Susan B. Anthony coin -- some said it was because of its size (bigger than a quarter, smaller than a fifty-cent piece) and others because of its political message. Whatever the reason, the United States gave up on the Susan B. Anthony dollar. Now almost 10 years ago Congress approved a new golden dollar coin, the Sacagawea.
The country was supposed to have learned from its dollar mistakes: The coin's size wasn't good for vending machines (an argument we now know was baloney) and it was too easily confused with a quarter. The new coin was larger and golden.
But the biggest mistake with the Susan B. Anthony coin was repeated with the Sacagawea. The only way to make these coin dollars work was to get rid of their paper counterparts. That's something that Congress was unwilling to do (even though the U.S. Mint estimated a potential savings of $500 million.)
Last week Congress approved new coins, a dollar honoring former presidents and a $10 honoring the former presidents' wives. (I wonder if Congress has thought through the potential of someday needing Bill and Hillary Clinton coins -- these could need to be issued twice, once as president, then again as a "wife.")
"An easy-to-use $1 coin will help bring much-needed efficiencies to the millions of low-dollar transactions that occur each day in our country. By making these exchanges more efficient with an easy-to-use $1 coin, businesses and consumers stand to reap enormous savings," said Sen. John Sununu in a press release. "In addition to its economic benefits, the $1 coin is a valuable educational tool -- much like the 50-state quarter series -- that will help inspire interest in the history of the leaders of our country."
The state quarters are popular. It's fun to collect them -- and see a new one when it rolls into circulation. But the state quarters don't compete with paper -- and that makes all the difference.
The new dollar act requires the federal government to give out the new currency as change, but makes no pretense of replacing the paper dollar. Instead it says the Sacagawea, Susan B. Anthony and new presidential coins will supplement each other.
Why can't we just get rid of the paper buck? It might be annoying for a time -- even a year or two. But we will all eventually get used to coins as dollars. That's certainly the case in Canada.
The coin debate is a symbol for American governance right now. Congress can't make hard decisions: It knows that dollar coins will save the country money but does not want to infuriate those who love the paper. Congress says do both. We, the country, can have it all.
The end result is we won't save money and will still infuriate those who champion their favorite monetary unit.
And what's with this business with more former presidents? Don't they already get enough attention?
Here's what I would do: Scrap the paper dollar, keep Susan B. and Sacajawea. Then I would add to the golden coin more names, honoring people who make America, America. I have a long list of nominees: What about coins for Ella Fitzgerald, Ray Charles or Louis Armstrong? Why not Caesar Chavez, Martin Luther King Jr. or Vine Deloria? Or what about World War II veterans like Fred Korematsu? Or Sojourner Truth, Wilma Mankiller or Eleanor Roosevelt?
Instead of the Clintons, Eleanor Roosvelt would make a great first, second coin figure. Better yet, she should be the only figure to grace a $2 coin.
Saturday, December 17, 2005
Sununu pitches some new currency
Dollar coins could bring in some dough
Sen. John Sununu has sponsored a bill that would mint new dollar coins featuring all 37 of the nation's dead presidents.
Lawmakers hope the coins - and an accompanying $10 gold piece for collectors featuring former first ladies - will be a big money raiser for the government like the 50-state quarter program. They also hope the dollar pieces will rev up interest in the Sacagawea dollars, which have been little-used.
The quarter program had raked in roughly $4 billion in revenues by its midpoint, said Becky Bailey, a U.S. Mint spokeswoman.
"The dollar coin is a valuable educational tool - much like the 50-state quarter series - that will help inspire interest in the history of the leaders of our country," Sununu said. It passed the House 291-113.
The front of the coins would depict former presidents, but not those who are living or have been dead for less than two years, and the backs would show the Statue of Liberty. Four coins a year would be issued, beginning in 2007, in the presidents' order of service. The treasury secretary would have authority over the designs.
As of now, there would be 38 coins issued for the 37 presidents -Grover Cleveland served two nonconsecutive terms and would be on two coins.
The bill also would create a companion gold bullion coin program bearing images of former first ladies and emblems of their causes on $10 coins. Companion coins for those presidents who had no spouse would show images of liberty and themes of the presidents'tenures. The coins would be 99.99 percent pure gold.
The Sacagawea coin, named for the Native woman who helped Meriwether Lewis and William Clark find their way to the Pacific Ocean, was introduced in 2000 but never caught on with the public. One-third of dollar coins issued would still be Sacagawea golden dollars.
Lawmakers hope the coins - and an accompanying $10 gold piece for collectors featuring former first ladies - will be a big money raiser for the government like the 50-state quarter program. They also hope the dollar pieces will rev up interest in the Sacagawea dollars, which have been little-used.
The quarter program had raked in roughly $4 billion in revenues by its midpoint, said Becky Bailey, a U.S. Mint spokeswoman.
"The dollar coin is a valuable educational tool - much like the 50-state quarter series - that will help inspire interest in the history of the leaders of our country," Sununu said. It passed the House 291-113.
The front of the coins would depict former presidents, but not those who are living or have been dead for less than two years, and the backs would show the Statue of Liberty. Four coins a year would be issued, beginning in 2007, in the presidents' order of service. The treasury secretary would have authority over the designs.
As of now, there would be 38 coins issued for the 37 presidents -Grover Cleveland served two nonconsecutive terms and would be on two coins.
The bill also would create a companion gold bullion coin program bearing images of former first ladies and emblems of their causes on $10 coins. Companion coins for those presidents who had no spouse would show images of liberty and themes of the presidents'tenures. The coins would be 99.99 percent pure gold.
The Sacagawea coin, named for the Native woman who helped Meriwether Lewis and William Clark find their way to the Pacific Ocean, was introduced in 2000 but never caught on with the public. One-third of dollar coins issued would still be Sacagawea golden dollars.
Utah's quarters: No handcarts
The three final design concepts refined by Treasury Department artists incorporated the most common themes. Utah's pioneers adopted the beehive - a common symbol of industriousness and teamwork - and state lawmakers declared it the state emblem in 1959. The Transcontinental Railroad was joined with a golden spike at Promontory Point in 1869. And the state has been home to winter sports for decades, starting with intrepid skiers who ventured into the surrounding canyons in 1910 and peaking with the state hosting the 2002 Winter Games.
The top design concepts
The three final design concepts refined by Treasury Department artists incorporated the most common themes. Utah's pioneers adopted the beehive - a common symbol of industriousness and teamwork - and state lawmakers declared it the state emblem in 1959. The Transcontinental Railroad was joined with a golden spike at Promontory in 1869. And the state has been home to winter sports for decades, starting with intrepid skiers who ventured into the surrounding canyons in 1910 and peaking with the state hosting the 2002 Winter Games.
The one unexpected thing about Utah's commemorative quarter is what won't be there.
There's plenty of obvious symbolism in three possible designs for the coin - a beehive, two steam engines meeting at Promontory and winter sports scenes. But the image of pioneer handcarts or covered wagons that many Utahns may hope to see will not end up on the state's commemorative quarter.
Artists from the U.S. Mint and a commission charged with sifting through public suggestions have settled on three final drawings for the back of a Utah quarter scheduled for release in 2007. None include a picture of Mormon pioneers entering the Salt Lake Valley in 1847. Instead, one incorporates the state emblem, another a significant event in the nation's history and the final design recognizes the state's role in winter sports.
"It's challenging to find a design that will please everyone," said Mike Mower, Gov. Jon Huntsman Jr.'s spokesman. "But we're anxious to have a quarter Utahns can be proud of."
Since 1997, the U.S. Mint has released five commemorative state quarters a year. The year of release is based on the year of statehood. California's coin recognizes environmentalist John Muir. Alabama's quarter honors Helen Keller. Georgia's is adorned with a peach. A quarter for Utah, which became a state in 1896, will be released in 2007, along with coins for Montana, Washington, Idaho and Wyoming.
Over the past year, hundreds of Utahns have suggested their own ideas, including renderings of sego lilies and covered wagons. About 90 percent of the proposals were drawn by schoolchildren. Some were too busy to reproduce well. Other submissions simply were limited by the size of the quarter. Early on, members of the governor's commemorative quarter commission decided simpler was better.
"It's a challenge. It's a very small piece of real estate to get a message across and try to represent everyone in the state," said Maralee Oleson, a graphic artist.
The governor's office will release drawings of the designs early next year. Then, based on public comment, Huntsman will forward a final design to the U.S. Mint. The coins will be available in just over a year.
The top design concepts
The three final design concepts refined by Treasury Department artists incorporated the most common themes. Utah's pioneers adopted the beehive - a common symbol of industriousness and teamwork - and state lawmakers declared it the state emblem in 1959. The Transcontinental Railroad was joined with a golden spike at Promontory in 1869. And the state has been home to winter sports for decades, starting with intrepid skiers who ventured into the surrounding canyons in 1910 and peaking with the state hosting the 2002 Winter Games.
The one unexpected thing about Utah's commemorative quarter is what won't be there.
There's plenty of obvious symbolism in three possible designs for the coin - a beehive, two steam engines meeting at Promontory and winter sports scenes. But the image of pioneer handcarts or covered wagons that many Utahns may hope to see will not end up on the state's commemorative quarter.
Artists from the U.S. Mint and a commission charged with sifting through public suggestions have settled on three final drawings for the back of a Utah quarter scheduled for release in 2007. None include a picture of Mormon pioneers entering the Salt Lake Valley in 1847. Instead, one incorporates the state emblem, another a significant event in the nation's history and the final design recognizes the state's role in winter sports.
"It's challenging to find a design that will please everyone," said Mike Mower, Gov. Jon Huntsman Jr.'s spokesman. "But we're anxious to have a quarter Utahns can be proud of."
Since 1997, the U.S. Mint has released five commemorative state quarters a year. The year of release is based on the year of statehood. California's coin recognizes environmentalist John Muir. Alabama's quarter honors Helen Keller. Georgia's is adorned with a peach. A quarter for Utah, which became a state in 1896, will be released in 2007, along with coins for Montana, Washington, Idaho and Wyoming.
Over the past year, hundreds of Utahns have suggested their own ideas, including renderings of sego lilies and covered wagons. About 90 percent of the proposals were drawn by schoolchildren. Some were too busy to reproduce well. Other submissions simply were limited by the size of the quarter. Early on, members of the governor's commemorative quarter commission decided simpler was better.
"It's a challenge. It's a very small piece of real estate to get a message across and try to represent everyone in the state," said Maralee Oleson, a graphic artist.
The governor's office will release drawings of the designs early next year. Then, based on public comment, Huntsman will forward a final design to the U.S. Mint. The coins will be available in just over a year.
Friday, December 16, 2005
Promoting dollar coin a good idea
The U.S. Mint is in the middle of its 50-state quarter campaign, in which every single state is getting a specialized 25-cent piece dedicated to it. The Mint is putting five a year into circulation.
The unique quarters have spurred many Americans, young and old, to collect them, not just the folks who are deep into the coin collecting hobby. Many TV, magazine and newspaper ads pitch maps, picture frames, glass containers and other items to allow people to display their state quarter collections.
Quarters, of course, are not exactly rare; indeed, they’re the coin of the realm when it comes to using everything from parking meters to automatic car washes to vending machines.
By contrast, the dollar coin is not nearly so popular, perhaps because we’re so accustomed to the dollar bill. The old “silver dollar” seldom turns up in cash drawers, nor do its successors that feature either Susan B. Anthony or Sacagawea.
Canada has been far more successful in promoting a dollar coin; its “loonie,” named for the bird on its face, is so well liked it’s now accompanied in northern cash drawers by a “twonie” — a $2 coin. Of course, the Canadians no longer have any paper money worth less than $5, so that might be the reason they’re popular.
Back in the USA, there appears to be no plan to abolish the $1 bill. But the Mint has taken a page from its successful state quarter campaign and come up with a plan to feature past presidents on the dollar coin starting in 2007 — assuming President Bush signs the bill Congress has sent him.
Every president, except those still living or who have been dead less than two years, eventually will be featured on dollar coins under the proposal. If the program is as popular as the state quarters have been, and we think it will be, the Mint will have to put a lot more of them into circulation.
One quibble we have is with the fact that Grover Cleveland will appear on two coins because he served two non-consecutive terms. Can’t we just put “1885-1889 and 1893-1897” on his and let it go at that?
That aside, we think the added circulation will convince people that a $1 coin is a good thing to have in your pocket, especially in a world where $1 is seldom enough to buy a soft drink from a vending machine and the change from a candy bar isn’t much more than a quarter.
The unique quarters have spurred many Americans, young and old, to collect them, not just the folks who are deep into the coin collecting hobby. Many TV, magazine and newspaper ads pitch maps, picture frames, glass containers and other items to allow people to display their state quarter collections.
Quarters, of course, are not exactly rare; indeed, they’re the coin of the realm when it comes to using everything from parking meters to automatic car washes to vending machines.
By contrast, the dollar coin is not nearly so popular, perhaps because we’re so accustomed to the dollar bill. The old “silver dollar” seldom turns up in cash drawers, nor do its successors that feature either Susan B. Anthony or Sacagawea.
Canada has been far more successful in promoting a dollar coin; its “loonie,” named for the bird on its face, is so well liked it’s now accompanied in northern cash drawers by a “twonie” — a $2 coin. Of course, the Canadians no longer have any paper money worth less than $5, so that might be the reason they’re popular.
Back in the USA, there appears to be no plan to abolish the $1 bill. But the Mint has taken a page from its successful state quarter campaign and come up with a plan to feature past presidents on the dollar coin starting in 2007 — assuming President Bush signs the bill Congress has sent him.
Every president, except those still living or who have been dead less than two years, eventually will be featured on dollar coins under the proposal. If the program is as popular as the state quarters have been, and we think it will be, the Mint will have to put a lot more of them into circulation.
One quibble we have is with the fact that Grover Cleveland will appear on two coins because he served two non-consecutive terms. Can’t we just put “1885-1889 and 1893-1897” on his and let it go at that?
That aside, we think the added circulation will convince people that a $1 coin is a good thing to have in your pocket, especially in a world where $1 is seldom enough to buy a soft drink from a vending machine and the change from a candy bar isn’t much more than a quarter.
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