Gold reaches out for $1,000/oz, if it makes it what will be the next long term objective?

London, 13 March 2008 - In recent days and weeks gold has show indecision as to whether it was set to correct having failed to reach the $1,000/oz level or whether it was still in its up mode. Today’s move into new high ground suggests the latter.With equities voting with their feet with the Dow and shares in Asia falling heavily in the past 12 hours, it does look as though fears in the financial markets are growing again. Indeed the dollar is under pressure and as we mentioned yesterday if you take the dollar as a barometer for the US economy then more stormy weather seems to be on the cards.Not surprising this is boosting demand for safe-haven assets, which is gold’s forte. However base metals, oil and other commodities are also being sucked up by investors looking for assets with some real economic value. However, you have to wonder the logic of chasing industrial metal prices to record highs when the cause for the need for safe havens is a deteriorating economic outlook. Indeed the poor outlook is not just confined to the US, concerns are growing that Japan may be heading for recession and if these two power-houses do slow down, then contagion is likely to follow. However this scenario might prove even more bullish for gold as if demand for industrial metals does start to suffer then it may be that we start to see rotation out of industrial commodities into the gold and agricultural commodities.If gold prices hit the $1,000/oz level then we would not be surprised to see prices advance further. Like the move through $850/oz, the previous multi-year high, the act of moving through $1,000/oz may well be seen as removing a barrier and lifting the lid off the market. Indeed it may be seen as another objective reached and one less barrier between it and the inflation adjusted price which is nearer the $2,000/oz level. Other yardsticks used to suggest potential targets include the number barrels of oil 1oz of gold would buy and what the average level of the Dow Jones equated to in ounces of gold. Over the past 30 years 1 oz of gold has bought on average 17 barrels of oil and in the 1980’s the Dow equated to some 5oz of gold. Basis these measures gives a target of $1870/oz using oil as the measure and $2,392/oz using the Dow as the yardstick.