Hayden Atkins - on the rise of Gold and low real rates

9 Aug 2011 Bloomberg
[Background: Gold $1765.700, up 46 points (+2.69%). Investors flee stocks, seek safety.

Presenter --
Gold has hit a new record. But does it still have room to rise? You think the downside risk to gold is pretty minimal?

Hayden Atkins, Precious Metals Analyst at Macquarie Bank --

Yes it's fairly minimal and hard to be bearish in these markets, particularly in the short term. I think though there is a question how high it's going to go given there are low real interest rates. How much lower can they go....markets are going to have to ask those questions.

Presenter --
So high can gold prices go? Substantially higher?

Hayden Atkins --
I think that's a fair assessment. Somewhere in the vicinity of 10 to 15 per cent makes sense. Over what time horizon that is kind of hard to say. But gold may not be a one way bet going forward. Remember some traders are going to be looking at the Swiss Franc and real interest rates, questioning how much lower they can actually go.

Presenter --
Yeah because gold has moved with the swiss franc.

Hayden Atkins --
Gold can break out of this trade and has done in the past. By no means is it continuously pegged to these things. It at least raises a question mark.

We could go somewhere between $1800 and $2000 an ounce.

Presenter --
What might prevent a rally or what might stop gold climbing the way is has? [Very important]

Hayden Atkins --
Either policy action to stabilize what is going on in debt markets or better news for growth.

Presenter --
Drops in the price of oil? Supply chain disruptions for Japan? Recession in US?

Hayden Atkins --
Yeah but that's going to take a few months.




Hayden Atkins --
We're still bullish on the outlook for China. That will counter-cyclically balance out the other base metals

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