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Analysts Lift Forecasts for Gold

Release Date: 
Tuesday, August 23, 2011

Analysts at UBS and Societe Generale raised their forecasts for gold prices as others continue to cite factors that are supporting the commodity.

Overnight, French bank Societe Generale upped its fourth quarter gold forecast to $1,950/oz. And less than three weeks since it last revised its price forecast, UBS said it now sees one-month gold at $1,950 an ounce, up from $1,725 an ounce, and three-month gold at $2,100 an ounce, from $1,850 an ounce. "But we want to stress that predicting price levels for gold has become a difficult exercise. No sooner are forecasts revised than gold targets new records, somewhat like the palladium market in 2010," said UBS analyst Edel Tully. "We think gold has enough momentum currently to travel north of $2,000 an ounce before year-end."

"Gold has continued to blast ahead even with a relatively strengthening U.S. dollar, strongly performing treasuries and other safe havens," Peter Richardson, chief metals economist at Morgan Stanley Australia Ltd., said. "All of that tells me that this is really all about preserving real purchasing-power."

"People are losing confidence in monetary management," said Nick Barisheff, who helps manage $650 million as president of Bullion Management Group Inc. in Toronto. "Gold has been a form of currency for the last 3,000 years and will continue to be so."

"Both central banks and individual investors are eying gold as this is the probably the only investment where they do not have to worry about the value being eroded," Barisheff said.

Darren Heathcote, Sydney-based head of trading at Investec Bank (Australia) Ltd., said "The market is very, very skittish" and "it wouldn't surprise me to see gold push higher in the current environment."

"I would say that we will reach $2,000 by the end of this year and higher levels over the years," said Louise Yamada, managing director of Louise Yamada Technical Research Advisors LLC in New York.

(Sources:  "Gold Tops $1,900 for First Time as Economic Concerns Lift Demand,"Bloomberg, August 23, 2011;  "Gold Tops $1,910 for First Time," Bloomberg, August 23, 2011;"Gold Tops $1,900, Then Pulls Back," Wall Street Journal, August 23, 2011; "UBS lifts one-month gold forecast 13% to $1,950," MarketWatch, August 23, 2011)

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†This material has been prepared for private use. Although the information in this commentary has been obtained from sources believed to be reliable, Goldline does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice.

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