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Gold May Edge Out Google in $500 Race

November 22, 2005|From Times Staff Reports and Bloomberg News

In the race for the $500 mark, gold is poised to beat Google Inc.

Gold rose $3.40 to $489 an ounce -- an 18-year high -- in New York futures trading Monday, as more hedge funds and other speculators climbed aboard the metal's latest rally.

"There's pressure to run gold up to $500," said Domenick Nardo, a trader at FIC Commodities in New York. "We've got some of the last people jumping on the bandwagon."

Investors and traders also have been jumping on the bandwagon of Internet search engine Google, which rose $9.15 to a record $409.36 a share Monday.

Gold and Google have nothing in common, of course -- except that both have been highly coveted by investors this year. Their performance in recent weeks has begun to resemble a horse race toward $500.

Brokerage UBS, in separate reports Monday, said that gold could reach $500 in the next three months and that Google should cross that mark in the next 12 months.

Gold is up $51.50 an ounce, or 12%, this year, and many gold-mining stocks have racked up even bigger gains. Goldcorp Inc., which rose $1.06 to $21.32 on Monday, is up 42% this year; Glamis Gold is up 34% after rallying 79 cents to $22.92 on Monday.

Investment demand for the metal has been driven by rising U.S. inflation. Gold historically has been an inflation hedge.

Gold's rally also stems from concern about supply relative to demand, said John Licata, an independent market analyst in New York. Global consumption of the metal, including jewelry use, was 2,773 tons in the first nine months, up 16% from a year earlier, the World Gold Council said.

On the supply side, South Africa, the world's biggest gold producer, said Monday that its output fell 15% in the third quarter, the largest drop in at least nine years, because of mine closures.

As the metal's price rises it is creating its own momentum, attracting investors who had all but abandoned gold in the 1990s, some analysts say.

"The gold genie has been let out of the bottle, and we are looking at $500 an ounce by the end of 2005 and $600 by the end of 2006 on momentum alone," said Thomas Au, an analyst at R.W. Wentworth in New York.

As for Google, its shares should jump 25% in the next 12 months, UBS analyst Benjamin Schachter said in a report. "Based on Google's current products and trends, the stock remains undervalued," he said.

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