Tuesday, October 7, 2008

Citigroup says gold will benefit from both monetization and muddle-through and doom & gold scenarios

Our longer term readers know we strongly disagree* with the timing of the gold promoters (see posts below). That said, it would be a disservice to not share opposing views. On a personal note, there is an interesting frisson to standing against the herd thundering the other way. At least once you get past the "Hmmm, maybe I didn't get the email" stage. December gold was recently at $888.00 up $21.80, which price is also up $6.00 from our first post naysaying gold in this environment.
From Mineweb:

Citigroup says gold is “badly mispriced,” asserting that “the forces that have propelled gold for the past five years are firmly in place.”

The optimism generated by the U.S. financial bailout and a sounder U.S. dollar may mute gold prices in the near term, but Citigroup analysts expected to gold to work its way higher through 2009/10 with average forecasts of $950/1000 per ounce.

Citigroup North American metals analyst John H. Hill continues to see copper "as well-positioned due to supply-side constraints, which span shortfalls at current mines, delays at mega-projects, and contract cancellations by governments."

In an analysis published Sunday, Hill noted, "Gold is being tugged in opposite directions by potent new investment demand, and uniformly dour sentiment for industrial metals amid dis-inflationary datapoints and a firmer dollar. These negatives may come into sharper focus after passage of the U.S. financial bailout but will likely prove ephemeral."

"We see gold as mispriced and a beneficiary in either the ‘Monetization and Muddle-Through' or ‘Gloom & Doom' scenarios. Physical off-take remains brisk, while central banks sales and mine output are running light," he added....MORE

*"Retail investors seek haven in gold coins amid crisis"- They're Early (or Late)

The Financial Times Sings Praise of Gold. They're wrong.

The Great Deleveraging (and what it means)