Gold Market #7 – Some Forecasts from the Former Head of Newmont Mining

Not sure if this is still true, but analysis I did on gold prices back in the 1970s indicated that the price of gold was correlated with inflation. The comments from Lassonde follow that same line of thought. From Bloomberg:

Gold will rise as high as $750 an ounce this year, about $100 more than today, as concern about accelerating inflation spurs demand for the metal as a store of value, Newmont Mining Corp. Vice Chairman Pierre Lassonde said.. . . . Higher interest rates are ``bullish for gold,'' ``The only reason rates are going up is because inflation is going up.''

Gold has climbed 2.3 percent this year, partly on speculation that higher prices for raw materials including crude oil and wheat will spur demand for the precious metal as a hedge against inflation.

The metal's rally has stalled since the end of April mostly because of a seasonal slowdown in jewelry demand in India and Italy, Lassonde said. India was the largest buyer of gold last year and Italy was Europe's biggest manufacturer of gold products, according to London-based research company GFMS Ltd.

``What's going on in my mind is very bullish because if you look at May and June, it's always on a seasonal basis the low months for the gold price,'' Lassonde said. ``It's because the Indian marriage season is over and the Italian jewelers stop buying because they're going into holidays in July.''

The slowdown may cause gold to fall as low as $630 in the next several weeks before rebounding to $700 or $750 by the end of the year, he said.

Toronto-based Barrick Gold Corp. is the world's biggest gold producer.