Will gold fall to $800/ounce?

       By: Ghanasyam
Posted: 2009-07-17 23:06:31
LONDON : Even though gold remained in its new found highs following the recession-boosted safe haven sales, now doubts are being expressed over its ability to stay above $900 per ounce in the coming months.

Although it has pulled back from the recent peak seen in February, the price has remained near historic highs amid uncertainty about how sustainable the current recovery is.

Even as equity markets bounced gold has consistently continued to trade around $900 an ounce, amid ongoing fears about the health of economies around the world.

Many analysts like GFMS believe gold will rise again from here, the main argument being that the unprecedented fiscal measures taken by governments to boost economies can only work in the commodity's favour eventually.

However, Julian Jessop, the chief international economist at Capital Economics, said the impact of government intervention had already been factored into the gold price, and he said in effect the price had been stationary in the past year.

He said he was also relatively bearish on gold going forward, arguing that falling demand for the actual metal, for use in jewellery predominantly, would likely weigh on prices.

Jessop's claim that gold has peaked already is supported by its performance over the last fifteen months.

Since the peak in March 2008, when it hit $1,030 an ounce, it has experienced a volatile period with the price trading in a range between $700 and $1,000.

Jessop said a combination of a strengthening dollar and the emergence of deflation would lead to a further correction in the price of gold in the coming months, and he said he expected gold to be back down at around $800 an ounce in a year's time.
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