Floating of Yuan Good For Gold Price

On the 21st of July 2005, the Chinese opted to float the Yuan within a specific range against a basket of currencies.

Jim Sinclair of jsmineset.com had some very interesting comments to make about this historic event and its impact on the future gold price.

Sinclair sees floating of the Yuan against a basket of currencies as effectively breaking its tie solely with the US dollar.

Sinclair says "this is an undeniable move away from the US dollar and will impact the thinking of those central banks who have already or are preparing to diversify out of complete reliance on the US dollar as a reserve currency."

"The most important implication of this move is that it reduces the need for China to purchase US Treasuries in the amounts accumulated in the past. " said Sinclair.

Sinclair concludes, "the move by China is presently neutral for the dollar but in a short time it will be recognized as negative."

Sinclair says "the strengthening in the recent lows for the gold price in this reaction. At the same time, the recent highs of the US dollar now become more significant as resistance and will be viewed as a probable top range should it be revisited.

Jim Sinclair's prediction for the gold price is that it will trade to $480 then $518 to $529. Sinclair says "The dollar will return in time to the .8050 level and much lower levels thereafter."

Now is the time to back up the truck and load it with gold coins.

Merrill Lynch Predicts Gold Price of $725 Due to Chinese Gold Jewellery Consumption

The price of gold may rise to $725 an ounce by 2010 as surging economic growth turns China into the world’s biggest jewellery consumer, said Graham Birch, who manages a Merrill Lynch & Co fund that has grown fivefold since 2000. Birch helps manage $8.5 billion in mining assets for Merrill Lynch in London, including the Gold & General Fund.

“The Chinese are getting richer, and have very high savings rates,” said Birch. “As they earn more money, they will spend more on things like jewellery.” Birch said.

“Chinese jewellery consumption rose more than 11% to 224.1 tons last year, according to London-based research group GFMS. It may increase to as much as 600 tons within five years", Birch says.

“The question is, where is all that gold going to come from?” said Birch.

Source: Merrill Lynch sees gold price at $725

Gold Price Capped

The gold price has been capped at $440 per ounce since last December by repeated selling of gold reserves by European central banks and the European Central Bank itself, says GATA (The Gold Anti-Trust Action Committee).

GATA's findings are based on the research of its consultant, gold market expert John Brimelow of Aegis Capital in New York.

"The ECB reported on Wednesday a sale of 360 million euros in gold last week, 996,592 ounces at the bank's new book value for gold, or 31 tonnes," John Brimelow said.

"This is a huge amount, matched only by the sale of 47 tonnes announced at the end of March (but reported only in May) and a 31.9-tonnes sale last December last year." said Brimelow.

Each of these sales corresponded with the gold price going higher than $440, as can been seen in the 1 year Gold Price History Chart.

"An indisputable pattern has now developed for the ECB to step forward as a massive seller when gold approaches the $440s," Brimelow said.

Brimelow says the ECB will be obliged to suspend gold sales in September 2005 if they are to keep within the volume limits they set for themselves in the renewal of the Washington Agreement on Gold.

Source: GATA: European Central Bank Gold Sales Repeatedly Cap Price Around $440

CNN reports $850 Gold Price Prediction

Katie Benner of CNN.COM reports that a handful of precious metals insiders at the recent New York Gold Conference predict that the price of gold will hit $850 an ounce in the next few years.

Benner says that the gold price rising along with the dollar and with oil jumping to record highs near $60 a barrel may signal a pickup in inflation ahead.

Benner quotes James Turk, co-author of the book The Coming Collapse of the Dollar and How to Profit From It saying "Despite all the rate hikes, the (Federal Reserve's) overnight lending rate is still less than inflation."

Charles de Vaulx, manager of the First Eagle Gold Fund told CNN "Middle East nations are getting more petro-dollars as (oil) prices rise, and they're not putting it back into paper assets," "They're trying to protect the value of their profits -- just like in the 1970s -- so they're buying gold," he said.

Read the entire article by Katie Benner on rising gold prices, oil prices and inflation at CNN.com