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Geopolitical Uncertainty
June 5, 2009

Why have gold bullion prices been strong?

Oil War Economy

"Energy and metal prices remainbuoyant

Commodity markets rallied strongly this week, helped by growing confidence in prospects for a rapid revival in the global economy following more evidence of improvement in leading indicators.

Investor inflows into commodities have picked up pace, helping lift prices in energy, agricultural and base metals markets.

In the oil market, Nymex July West Texas Intermediate reached $70.32 on Friday, a seven-month high, but later retreated to trade 25 cents lower at $68.56 a barrel, up 3.4 per cent this week.

ICE July Brent hit $69.91 but later eased back to trade 41 cents lower at $68.30, up 4.2 per cent on the week.

On Thursday, Goldman Sachs raised its 2009 year-end projection for oil prices from $65 a barrel to $85 a barrel and dropped its previous forecast for a pullback in the next three months.

Tom Pawlicki of MF Global said: 'Unabated investment growth in commodities like crude oil will be fuelled further by such predictions.'

Gareth Lewis-Davies of Commerzbank said oil prices prices had risen in the past few months largely as a consequence of a decline in investor risk aversion. 'However, the upward move in prices is totally disproportionate to the reductions in inventories seen so far,' he said. 'Only US gasoline inventory levels offer true price support as crude oil and other product inventories are currently at high levels.'

Gold fell 2 per cent to $959.50 a troy ounce on Friday, retreating after the dollar gained in response to better US employment data than expected.

Gold hit $989.80 on Wednesday but lost 2 per cent over the week as investor inflows into gold exchange-traded funds and buying interest from jewellery makers remained muted.

However, Rupert Robinson, chief executive of Schroders Private Bank, said 'all the ingredients' were in place for a bull run in gold and gold stocks.

'The dollar is beginning to wobble, US Treasuries are under pressure and inflation is set to rise,' said Mr Robinson."

*This information is solely an excerpt of a third-party publication and is incomplete. Please subscribe to the referenced publication for the full article. This is not an offer to buy or sell precious metals. Investors should obtain advice based on their own individual circumstances and understand the risk before making any investment decision.

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