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Morgan Stanley Forecasts $2,200 Gold in 2012

Release Date: 
Friday, October 7, 2011

Morgan Stanley is projecting that gold will perform best among all commodities next year and may rally to a record as investors seek to safeguard their wealth against slowing economic growth. The firm's 2012 gold forecast was increased 35 percent to $2,200 an ounce, while a best case target for next year has gold prices rising to $2,464.

Gold prices rallied after U.S. data showed the jobs market was more robust than initially thought in both September and August, calming concerns over the U.S. economy. The U.S. Labor Department report showed 103,000 jobs were added to non-farm payrolls last month, above the 60,000 forecast, while the August data was revised to show a rise of 57,000 that month, up from zero reported previously.

Commodities may gain 20 percent over the next year as emerging market growth offsets the impact of Europe's debt crisis and a slowdown in developed economies, Goldman Sachs analysts led by Jeffrey Currie wrote in an Oct. 4 report.

MKS Finance head of trading Afshin Nabavi sees gold prices increasing towards record levels by the end of 2011. "What you're seeing is demand for physical metal continues to be very, very strong. China was off all this week. They'll be back next week and I presume demand will only increase," he said. "Towards the end of the year, [gold] will be closer to $2,000 again."

"With macro headlines threatening demand across the complex, we have become more selective about commodity exposure," Morgan Stanley analyst Hussein Allidina wrote. "Gold and silver are our top commodity picks heading into 2012."

"Gold, and silver to a much lesser extent, are viewed as safe havens and store of value as well as the closest thing to a global reserve currency," the report said. Gold "has been the most resilient in past recessions," and silver may also gain.

(Source: "Resilient' Gold May Surge to Record as Economy Slows, Morgan Stanley Says," Bloomberg, October 7, 2011 "Gold Steady Ahead of U.S. Job Figures," CNBC, October 7, 2011; "Gold bounces after U.S. jobs data rattles dollar," Reuters, October 7, 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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