Gold At $1,950 Within The Month Reaffirm UBS; JP Morgan $2,500 Year End Call Remains

I am long precious metals, especially gold. So, once in a while, I will post some articles/videos that I feel are notable milestones for my own records. Of course, those of you who are more invested may want to consider gold and silver in your own investment portfolio as well. Mike Maloney has aptly presented a strong argument for gold, which I will not repeat here. Feel free to view that video for your own education. For those who might be more familiar with Robert Kiyosaki instead, you might like to know that he is long silver and gold as well. Well, more so silver.

Read from source here

Submitted by GoldCore
30th August 2011

Brimelow said that “bearing in mind the huge gold importing by China in the latter part of last year, in JBGJ’s opinion this is currently the key issue in the gold market.”

The UBS daily note reports that “the mood among gold investors appears to be to buy the dip rather than chase the market, which is understandable given last week's volatility.”

UBS conclude that the “violent sell-off hasn't done any lasting damage to gold, and the reasons investors bought gold in recent months remain valid. Our one-month forecast of $1950 remains in place.”

UBS three month price view is $2,100 per ounce.

Very significant demand being seen for bullion internationally and especially in Asia means that gold’s correction is likely to again be of short duration. Indeed, the scale of demand suggests that gold may not need a long period of consolidation and could again surprise to the upside.

Non gold experts, many in the financial services industry, continue to warn of a bubble. Their analysis is extremely simplistic and almost exclusively based on recent price action.

However, the majority of those in the industry and the majority of gold market analysts remain bullish.

Throughout August, prior to the recent record nominal high and subsequent selloff, many banks raised their forecasts for the year.

SocGen raised its average gold price forecast to $1,950 an ounce for the fourth quarter of 2011 and to an average of $2,275 per ounce in 2012.

Bank of America-Merrill Lynch said in a research note it was revising its 12-month gold target to $2,000 an ounce.

JPMorgan said that gold could reach over $2,500 per ounce prior to year end.

The recent sell off has not seen banks and analysts revise down their price forecasts.

Since 2003 that the real high of $2,500 per ounce (inflation adjusted and based on CPI) would likely have to be reached prior to gold being a bubble.

Those informed about the gold market know that absolutely nothing has changed about the supply and demand dynamics driving the gold market.

Singapore Losing Competitive Edge as Currency Soars: Expert - CNBC

Singapore Losing Competitive Edge as Currency Soars: Expert - CNBC

The languishing U.S. dollar has resulted in unprecedented gains for other currencies. The Singapore dollar, for one, hit a record high against the greenback on Wednesday, as the latter scraped three-month lows versus a basket of currencies.


While this may spell cheer for investors long on the Singapore dollar [SGD=  1.2037    0.002 (+0.17%)   ], it paints a less rosy picture for the nation’s economy, say financial experts.

Wei Zheng Kit, an analyst at Citi, notes that while Singapore remains competitive on many measures, the appreciation of the Singapore dollar could erode its advantage in the near term.

"While SGD appreciation can eventually curb domestic inflation, it may exacerbate the loss of cost competitiveness in the short run, because of the lag needed for a stronger exchange rate to bring down inflation," Wei said, in a report.

Singapore's June consumer price inflation (CPI) rose to it's fastest pace in six months, to 5.2 percent, driven by rising housing and food costs.

"Since 2008, Singapore has seen inflation outpace foreign trade-weighted inflation, reversing the pattern for the past 20 years," according to the Citi report.

The Singapore dollar is among the best performing currencies in Asia this year, since the state's de-facto central bank – the Monetary Authority of Singapore (MAS) – said in April it would allow further appreciation to tame price gains. The currency has gained over 6 percent versus the U.S. dollar so far this year, and 24 percent in the last five years.

There are already signs the stronger currency has been crimping competitiveness. According to the 2011 World Competitiveness Index report compiled by Swiss business school IMD, Singapore slipped from the top spot to third, overtaken by the U.S. and Hong Kong. Citi says the effect may be most pronounced in the labor market.

"The supply shock from tightening of foreign worker inflows will likely imply wage growth could be structurally higher than the 3 percent annual average of the 2000s,” the report stated. “More importantly, wages have risen faster than Asian competitors, especially once FX appreciation is included.”

Meanwhile, as wages climb, productivity has not kept pace. The report predicts growth in Singapore's unit labor costs to “likely outstrip those of its Asian competitors in 2011, similar to the overheating period in late 2006-2008."

The spillover from a stronger Singapore dollar is also being felt in the property sector. Citi observes that while Singapore's office rents were lower than Hong Kong's, the gap is narrowing as its currency appreciates.

Losing its competitive edge may sting the most during the next economic slump, but Citi says Singapore has the ammunition to lessen some of the pain.

"The loss of cost competitiveness could prove to be a double whammy once the economy is in recession, though this could at least partially reversed via monetary easing."

© 2011 CNBC.com