Tags: Licata | Gold | Wont | Skyrocket | silver | Copper | Fall

Licata: Too Much Optimism Over Price of Gold

Tuesday, 22 Feb 2011 12:00 AM

By Forrest Jones and Ashley Martella

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Gold, the darling among commodities investors over the last few years, won't skyrocket like some observers predict, says John Licata, chief commodity strategist for Blue Phoenix, a commodities and metals research company. Silver and copper, meanwhile, have been on the rise, although prices for those metals are due for a correction as well, Licata tells Newsmax.TV.

"In terms of my prediction for gold, I actually feel there's a lot of optimism, too much optimism, and that's coming from one of the biggest fans of gold over the last few years," Licata says.

"With the emergence of new ETFs and a lot of retail money coming into the space as well, I actually think that we're getting a little bit too frothy and the recent pullback in my opinion still has room to go."

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Exchange-traded funds (ETFs) can bring in more investors into the markets and have pushed up prices to the point that corrections are due.

Gold bullion has been trading around $1,405, although some have said the precious metal could climb as high as over $1,500.

Silver and copper, metals that are in demand from developing economies such as China, have also posted strong gains over the past years, but they, too, are due for a breather — silver especially.

"I think both silver and copper are due for a pullback. Quite frankly, I'm actually looking for silver prices to pull back to around $25," Licata says.

Silver is currently trading just over $33.

Silver has many more industrial uses than does gold, including use in the development of medical supplies, telecommunications equipment and alternative energy devices.

"It's my opinion that silver has become the much more predominant metal," than gold, Licata says.

"However, with that being said, we actually in 2010 were trading in the mid-teens. So to trade now above $30 makes me a little skeptical that we're going to maintain those levels. "

Furthermore, events in the Middle East recently, highlighted by the unrest in Egypt, won't keep metals and oil prices high for long.

"My view that there's been too much negative sentiment related to those events in Egypt."

OPEC countries, meanwhile, are hinting at adding oil into the market to keep prices from rising to the point they would curb demand.

Those plans, Licata says, could be put on hold.

"They wanted to talk about adding more supply when the price of crude oil was north of $90, now I'm not so sure they're willing to have that conversation."

Oil, however, could hit $150 a barrel over the longer term, and the Obama administration is not helping very much.

"My concerns are that addiction to oil is only going to continue. And with the White House saying we're going to ban offshore drilling on the east coast and the west coast and really continue to curb offshore drilling in the Gulf of Mexico, I think we're actually shooting ourselves in the foot, and that's only amplifying the new emission standards our refineries have to meet," Licata says.

"There hasn't been a new refinery built in the United States since 1976, so you can't actually expect that these refineries are going to be so willing to produce a cleaner-burning fuel that's going to going to cost them more money."

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