How much do you think the price of gold will rise in the next few years?
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.
Frequently Asked Questions about this Article…
What are the current gold price forecasts and what could drive gold higher?
Analysts quoted in the article expect gold to keep rising. Newcrest Mining CEO Greg Robinson said gold could reach US$2,500 an ounce within five years, while JP Morgan analyst Matthew Lehmann expects gold to average about US$1,925 an ounce in the last three months of this year. The article says these forecasts are supported by factors such as weakening US and some European currencies and rising demand from expanding middle classes in India and China.
How did Newcrest Mining shares perform recently and what does that mean for investors?
Newcrest, described as the world’s fifth-biggest gold producer, finished the week at $34.25 on the local market. Since early January its shares had risen by $3.55 (about an 11.6% gain). For investors, that reflects the recent strength in the gold price and positive sentiment toward major gold producers noted in the article.
How is the Greek debt situation affecting the Australian market right now?
The article says Europe, and specifically Greece-related developments, dominated local market headlines and kept investors in a holding pattern. Delays on agreements about the size of private bondholder writedowns and a second Greek bailout left markets waiting, although European Commission vice‑president Olli Rehn said euro‑zone finance ministers aimed to agree on a second bailout soon. That uncertainty contributed to a modest weekly fall in major Australian indices.
Why did supermarket stocks like Wesfarmers and Woolworths fall this week?
Investor reaction to recently released sales figures prompted concerns about the long‑term prospects for supermarkets, which dragged down the consumer staples sector. The article reports Wesfarmers shares fell to $29.47 and Woolworths to $24.40 after those sales updates.
What effect could the proposed Glencore–Xstrata tie‑up have on major miners and the ASX?
News that Glencore International and Xstrata were planning a tie‑up of their mining assets softened major miners. City Index analyst Peter Esho told the article the roughly US$80 billion (about $75 billion) deal was likely to be a short‑term drag on BHP Billiton shares and, by extension, on the broader Australian market. The article notes BHP was at $37.60 and Rio Tinto at $70.50.
How did the big Australian banks perform and what was driving their share movements?
Banks lost ground during the week as Europe’s debt crisis continued to pressure lending costs. The article lists recent prices of major banks: Westpac at $20.79, ANZ at $21.11, NAB at $23.75 and Commonwealth Bank at $50.57, reflecting the sectorwide softness described.
What happened to the S&P/ASX 200 and All Ordinaries last week?
The S&P/ASX 200 fell by 37.1 points, down 0.86%, while the All Ordinaries dropped 28.36 points, or 0.65%. Those moves marked the first weekly losses for both indexes after four consecutive weeks of gains, according to the article.
How are investors reacting to macro signals like US economic comments and upcoming data?
The article says investors were watching macro signals closely: Federal Reserve chairman Ben Bernanke told Congress the US economy was improving but still vulnerable to shocks, and investors were awaiting US unemployment data (economists expected the jobless rate to remain around 8.5%). IG Markets analyst Stan Shamu observed that, despite delays on European deals, investors remained surprisingly patient while waiting for final agreements.
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