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Citigroup Analyst Sees Gold Hitting $2,500-$5,000 an Ounce

Release Date: 
Friday, July 29, 2011

Gold traded at new records on the New York Spot Market as the House fails to pass a debt ceiling bill and GDP numbers signal a stalled recovery. The GDP report, which revealed a tepid 1.3% growth rate in the second quarter, raises the possibility of further monetary easing, thus, prompting investors to buy the yellow metal as a hedge against a weaker dollar. "It was quite a bad release and it raises hopes that there will be more monetary easing in the form of quantitative easing and that's positive for gold as an investment asset," said Matthew Turner, precious metals analyst at Mitsubishi.

As the possibility of a U.S. default becomes increasingly likely, many analysts are predicting that gold could see a parabolic spike to $1,800 an ounce or higher overnight. Jeff Casey, Casey Research Senior Precious Metals Analyst says if there is no resolution, there will be "quite a rush into gold." Casey told investors he sees gold at $2,000 an ounce in the unlikely event of a default. Even if congress votes to raise the debt ceiling before the August 2 deadline, Casey believes sovereign debt concerns and the debasement of currencies around the world will continue to drive gold prices higher. According to Casey, "Long-term, gold would have to move higher."

In a note to clients, Citigroup Analyst Heath Jansen says concerns over sovereign debt in the US and Europe could push gold up to $2,500 an ounce and potentially $5,000 an ounce. According to Jansen, "When investors are hungry for gold, the metal has a habit of rising exponentially which has no parallel amongst metals." Jansen also cites debasement of fiat currencies are a primary driver for gold continuing to hit new record highs.

(Sources: "Gold Rises to Session High on Weak GDP Report" Reuters, June 29, 2011; "Gold Prices Spike on Sour GDP Data" The Street, June 29, 2011; "Citigroup Analyst Sees Potential for $2500 Gold, Randgold Resources Favored Equity Play" Proactive Investors, June 29, 2011)

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