Wednesday, February 22, 2006

Gold Price Predictions for 2006

According to the AAP report, gold has broken its shackles, surging past the magical $500 an ounce mark, and it may just be the beginning of a new gold boom.

In late November, the spot price of gold finally followed up on its threats and pushed through the psychological barrier of $500 an ounce. The last time it touched these highs was when Alan Greenspan became chairman of the United States Federal Reserve.

It was 1987, and gold reached a high of $502.97 an ounce on the spot market. Today, many analysts are tipping the gold price will not just break the $500 mark but will leave it in its wake.

Ord Minnett research director Russell Lander believes we could just be at the foothill of a gold boom bringing with it gold fever.

"Gold really does affect people's mood...and people become very irrational, get excited and they rush into stocks," he said. Gold is also considered a safe haven in times of political instability or economic pressure.

Recently the rising oil price and fear of increased inflation has seen investors flock to the precious yellow metal, said CommSec commodities analyst David Thurtell. "Some people like it as an inflation hedge and, since the terrorist concerns started, some people have used it as a bit of a safe haven," he said.

But as the price of oil eases, inflationary concerns are being replaced with concerns about missing an investment opportunity. Thurtell expects gold will continue its run for the first half of 2006, possibly reaching $550 an ounce.

"Then we could see a bit of a demand reaction and a bit of a supply response," he said. By the end of 2006 the spot price of gold could pull back to around $475 an ounce, according to CommSec.

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