Golden days for bullion but stocks still in holding pattern

The chief executive of Newcrest Mining, Greg Robinson, thinks it could reach US$2500 an ounce within five years.

That's what he told investors at the Melbourne Mining Club this week, as gold edged back up towards prices not seen since November.

In 2001, gold averaged $US273 an ounce. Yesterday it closed at $US1758 an ounce, up $US11.55.

Matthew Lehmann, a JP Morgan analyst in London, thinks gold could average $US1925 an ounce in the last three months of this year, passing last September's record high of $US1921.

So, the trajectory of the gold price doesn't seem to be in dispute.

But Robinson's prediction was based on the assumption that the US and some European currencies would continue to lose value in coming years and that the swelling middle classes in India and China would add to the demand for the precious metal.

Shares in Newcrest, the world's fifth-biggest producer of gold, finished the week on $34.25 on the local market. Since early January the shares have risen by $3.55, up 11.6 per cent.

The local market was dominated again this week by news from Europe, where anything Greece-related seemed to be stuck in a holding pattern.

Despite promises that European officials and private bondholders would come to some kind of agreement on the size of the writedown the bondholders would take on Greek debt, no announcement was made.

Analysts were surprised at the languid reaction from shareholders.

"Despite the ongoing delays, investors are surprisingly still patiently waiting for final agreements on the debt swap and second Greek bailout," IG Markets analyst Stan Shamu said.

"But there was some comfort provided by comments from the European Commission's vice president, Olli Rehn, who said that euro zone finance ministers aim to agree on a second Greek bailout on Monday."

Meanwhile, the US Federal Reserve chairman, Ben Bernanke, told Congress this week that the American economy was improving, but remained vulnerable to "shocks".

Last night investors were waiting for news on the latest US unemployment data, with economists predicting the jobless rate would remain steady at 8.5 per cent.

The S&P/ASX200 lost 37.1 points over the week, down 0.86 per cent, with the All Ordinaries down 28.36 points, of 0.65 per cent, making it the first loss for both indexes after four weeks of gains.

Dragging the market down yesterday was a fall in the consumer staples sector as investors considered the long-term prospects for supermarkets after Wesfarmers and Woolworths released sales figures earlier this week.

Wesfarmers shares sank 43? to $29.47 and Woolworths was down 20? to $24.40.

The major miners eased as investors mulled the implications of news that Glencore International and Xstrata were planning a tie-up of their mining assets.

City Index analyst Peter Esho said the $US80 billion ($75 billion) deal was likely to be a short-term drag on BHP Billiton shares and, in turn, the whole Australian market.

BHP shed 2? to $37.60 and rival Rio Tinto was off 22? at $70.50.

Banks lost ground, with Europe's debt crisis continuing to put pressure on lending costs.

Westpac lost 13? to $20.79, ANZ was down 25? to $21.11, NAB fell 14? to $23.75 and the Commonwealth Bank lost 9? to $50.57.