- LONDON (Reuters) - Gold is
firmly back in vogue, with analysts expecting more price gains towards
$400 an ounce as a sinking dollar and security worries highlight the metal's
status as a safe-haven for investors.
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- "The general environment is still so uncertain --
it's one where really no one is going to sell gold in a big way,"
Kevin Crisp, analyst with Koch Metals, said.
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- Crisp said financial market worries over Iraq and a warning
from U.S. Attorney General John Ashcroft on potential U.S. targets for
al Qaeda were also fuelling the rise by gold -- now trading around $393
an ounce.
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- "If the market can keep up its current momentum
then a test of $400 is perfectly possible," he added.
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- "There's some evidence that the funds have become
involved again...and the dollar is a key driving force," Societe Generale
economist Stephen Briggs said.
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- John Reade of UBS Warburg said: "Commodities are
generally picking up again after the China and U.S. interest rate issues
collapsed, so that's taken away a negative factor for gold."
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- He said investors might find better levels to buy the
metal but suspected further gains lay ahead.
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- "I would say I'm two-thirds thinking of further
upside."
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- UPS AND DOWNS
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- Bullion has had a bumpy ride in the last couple of months,
moving in and out of investors' affections as portfolio insurance.
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- It was flavour of the month in early April when fund
buyers attacked 15-year peaks over $430.00 as dollar weakness pulled money
into metals.
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- A weaker dollar makes dollar-priced bullion less expensive
for non-U.S. investors.
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- Then came a brutal sell-off as sky-high speculative interest
gave way amid a resurgence of the U.S. currency as stronger economic data
pointed to decent growth and expectations of a dollar-boosting interest
rate rise.
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- China -- a major metals consumer and producer -- also
figured heavily as commodities plunged in late April when fund buyers were
spooked by measures taken to calm down China's rampant economy, which grew
by 9.1 percent last year.
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- Analysts were saying bullion faced a protracted stay
in the doldrums as the market touched a seven-month low of $371 in early
May, but now the impact of oil prices testing record highs has put the
dollar firmly on the defensive and gold back on course for the highs.
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