Gold expected to reach new high next year
GOLD will rise to a record next year, increasing for an unprecedented eighth consecutive year, as investors seek protection from accelerating inflation, metals analysts say.
Gold will probably average US$800 an ounce, compared with US$696 this year, according to the median estimate of 37 traders, analysts and investors surveyed by Bloomberg News.
Gold appreciated 30 per cent to US$824.50 an ounce in London this year as at Wednesday, its best year since 1979 when the Iranian revolution crippled crude oil exports and United States inflation exceeded 13 per cent.
'I do see gold hitting a new high at some point in the first half,' said Mr John Reade of UBS, who is tied as the most accurate analyst with Goldman Sachs International economist James Gutman in the London Bullion Market Association's 2007 gold price forecast.
Gold rose as record oil prices drove up inflation, and supplies from South Africa, the world's biggest producer, dropped to the lowest in 84 years.
Mounting losses in credit markets tied to US sub- prime mortgage loans spurred demand for alternatives to stocks and bonds, while the US dollar's drop to a record against a basket of trade-weighted currencies boosted investor interest in commodities.
Prices rose to within 0.5 per cent of the record high on Nov 7. Gold is the second-best-performing metal after lead this year. An index of 26 commodities gained 22 per cent this year as at Wednesday.
US consumer prices increased 0.8 per cent last month, the most in more than two years. Inflation in the 13-nation euro region accelerated to 3.1 per cent last month, the fastest since 2001, according to Eurostat. Japanese consumer prices rose 0.1 per cent in October, their first gain this year.
'The two stories for 2008 are going to be the sub-prime credit crisis and inflationary issues,' said Mr Ross Norman, a director of TheBullionDesk.com, a data provider. He was formerly a trader of physical bullion. Gold may climb to 'pretty well above US$1,000 next year', he said.
Investment demand for gold may easily rise to 500 tons, worth about US$13 billion (S$18.9 billion), compared with 384 tons last year, said Mr Philip Klapwijk, the chairman of London-based research firm GFMS.
'We see the investor base for gold widening,' he said. 'We're still talking small numbers compared to equity flows or other assets.'
But Mr Gutman said in a Dec 11 report that gold will drop to US$790 in six months and US$750 in 12 months.
'As the US dollar gains strength once again, the price of gold will, in turn, likely decline,' the report said. The bank recommended selling December 2008 gold futures.
BLOOMBERG NEWS
