Updated: 2 Jan, 2008

Gold Market Prediction For 2008

January 2, 2008 Well, 2007 saw gold close at $833.30. This was a 30% increase in the price of gold over the year. Gold stocks, on the other hand, fluctuated between a negative return and a 15% return. The bullion outpaced the stocks, which is a bit unusual, but then it was a rocky year for securities, with more downs than ups. So, for the year 2007, gold bullion shinned. It does face a multiple of problems for 2008, though. First is the price for gold jewelry, which remained relatively constant in price, perhaps rising 5%. Gold jewelry is of primary importance, since 70% of all gold is used to manufacture jewelry (World Gold Council). Since gold rose 30% this year and about 20% last year, why has jewelry remained relatively constant? Several reasons, and the primary one is jewelers purchase gold in volumes, and the average price for the gold used in the past couple of years was around $600/ounce. This stock is pretty much used up by now, though. The other reason, is jewelry manufacturers have shifted manufacture to overseas manufacturers, where the cost of labor is less than in the US. These two factors have been primarily responsible for the relative calm prices for gold jewelry over the past couple of years. The constant gold jewelry price is about at it's end, though, as major jewelry manufacturers are bound to pass on the increased cost of bullion to the consumers and "sticker shock" will ensue. In all probability, this will cause a decrease in the consumer demand for gold jewelry in 2008. This can only have a dampening effect on the price of gold, as demand drops. Although gold is relatively a good value at $800/ounce and even at $1000/ounce (see my article "Is Gold Becoming Too Pricey For Consumers? (Oct. 7, 2007)). Eventually some consumers will realize this and buy gold jewelry again, but at a slower pace than previous. Gold investors have been getting into the bullion ownership market big time in the latter half of 2007, and they were responsible for a chunk of the auriferous metal's rise to historic price levels. Since oil is flirting with $100/barrel and the US dollar is not likely to strengthen a lot in 2008, this will bring upward pressure on the gold prices. There is no denying that gold is a scarce commodity, with only about 35 years of reserves left (US Geological Survey), even though it is rumored than Anglo discovered a +2,000,000 ounce r eserve in Columbia. This leads me to believe that 2008 will be a tumultuous year for gold, fluctuating between a broad range of $750 to $900/ounce. In other words, it will be a "traders market", with buying and selling opportunities everywhere. Gold will probably close this year in the $850-$900 price range. Silver, well, it will wander along, probably increasing a bit also, maybe up to $16/ounce. The Platinum Group Metals should also have a descent year trending up. So, I will probably pop the cork on the bottle of Dom, again next New Years Eve, and toast the Golden New Year. -------------------------------------------------------------------------------- But that's just my opinion. Charles Kubach Mine-Engineer.Com 2 January, 2008

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