New York (Platts)--18Aug2008

Gold remains vulnerable and could fall back below the $800/oz level if
the dollar rally continues, even though the yellow metals remain oversold,
according to Jeffrey Nichols, president of American Precious Metals Advisors.
Gold bounced above $800/oz Monday, with the COMEX October contract settling at
$801.80/oz.

"If today's move back over $800/oz manages to hold for a few days, the
market's technical situation will be much improved," said Nichols in special
advice to his clients. "However, the metal still needs to rebuild support at
key levels between $800/oz and $900/oz -- and committed buyers need to return
-- before a sustainable advance can take hold. In the meantime, another pop in
the US dollar/euro exchange rate or further weakness in oil could send gold
back down below $800/oz again."

Nichols noted that the credit crunch of the past year has reduced
liquidity available to precious metals traders and speculators, the result
being increased volatility in gold prices -- both on the way up and on the way
down.

"The good news is that seasonal factors will soon be turning positive.
Gold demand -- from the jewelry industry as well as key Asian markets -- is at
its seasonally weakest in July and August. As a result, the metal is
especially vulnerable during the summer months to other negative factors and
forces. But, fortuitously, seasonality turns positive in September and builds
in the fourth quarter as Christmas-related jewelry fabrication demand and
seasonal Asian buying picks up.

"Our Indian jewelry contacts report that demand, which had fallen sharply
since early this year, has picked up in the past week, suggesting that
seasonal buyers are returning early in response to perceived bargain price
levels and this has definitely helped the US dollar gold price stabilize,"
said Nichols. "Long-term price prospects remain as bright as ever -- and
nothing in the recent market performance has changed our forecast of record-
high prices in the next few years. The schedule may have been set back a few
months, but the train is still on track and we still expect to see gold back
over $1,000/oz, if not late this year, then almost certainly in the early
months of 2009."

According to Nichols, his forecast of record-level gold prices later this
year or early next year is based on economic and technical factors. He noted
that "the right confluence of economic and geopolitical developments" could
propel the gold price into the $1,500-2,000/oz range within the next
few years. Even at $2,000/oz gold would still be trading below its January
1980 high of $805/oz, which after adjustment for inflation, is equivalent to
about $2,300/oz today.

"We believe the market will be supported by a deteriorating economic
situation in tandem with positive supply-demand fundamentals," said Nichols.
"In brief, rising incomes and wealth in China, India, and other newly
developed nations more than compensate for any shrinkage in the top industrial
nations."

--Ovid Abrams; ovid_abrams@platts.com