Gold Down In Value Sharply

Gold prices may fall 6.4 percent this year, snapping a four-year rally, as U.S. interest rates rise, eroding the appeal of the metal as an alternative investment to the dollar, Mitsui & Co. said.

Prices of gold may average $410 an ounce this year, from $438 in 2004, Tim Gardiner, president of precious metals trading at Mitsui, Japan's second-biggest trading company, said today at Paydirt's Gold Conference in Perth.
The precious metal has risen every year since 2000. The New York Board of Trade's Dollar Index, which weights the currency against six others, has fallen every year since 2001. Gold has fallen 4.4 percent from a March 11 two-month high of $447.05 on speculation of more interest rate rises after the Federal Reserve increased rates seven times since June.

"The rate of price increases in gold appears to be slower and may turn negative in 2005,'' New York-based Gardiner said.

"We believe the big fall in the U.S. dollar is over. The Fed can continue to raise interest rates, where others, such as Europe and Japan, can't or won't.''

A forecast global economic slowdown because of U.S. rate rises may hurt Australian gold miners less than producers of industrial metals, Bill Evans, general manager of economics at Westpac Banking Corp., said.