Gold to hit at least $1,400/oz - Capital Economics

LONDON Thu Sep 23, 2010 8:40pm IST

Gold bars are displayed at Habib Jewels' boutique in Kuala Lumpur, September 17, 2009. REUTERS/Bazuki Muhammad/Files

Gold bars are displayed at Habib Jewels' boutique in Kuala Lumpur, September 17, 2009.

Credit: Reuters/Bazuki Muhammad/Files

Related Topics

LONDON (Reuters) - Gold could rally to "at least" $1,400 an ounce next year as investors seek refuge from further uncertainty in the global economy and beleaguered financial system, Capital Economics said in a report on Thursday.

The economic research consultancy said while it remains unconvinced by some arguments for gold, the threat of further instability in the financial system was likely to spark fresh gains in the precious metal, currently near record highs.

"Fears of runaway inflation or a dollar collapse, which underpin some of the most bullish forecasts for gold, remain exaggerated," it said.

"Nonetheless, prices should continue to be supported by strong demand for a safe haven from other potential economic and financial shocks, such as a U.S.-China trade war and the break-up of EMU."

The company also lifted its year-end gold forecast to $1,200 an ounce, indicating a slight retreat from the precious metal's current $1,290 an ounce on expected dollar strength. Prices hit a record $1,296.10 an ounce on Wednesday.

Capital Economics remained relatively cool towards gold earlier this year as some commentators started to lift their forecasts for bullion prices, predicting a return to $900 an ounce in a report released in late March.

However, it said with the prospect of further quantitative easing threatening to erode the value of paper currencies, the precious metal is likely to stay in strong demand.

"With official interest rates more likely to remain near zero in the major economies for the foreseeable future (minimising the opportunity cost of holding gold) and additional QE more likely than an early exit, it is hard to see anything on the horizon to change positive sentiment towards gold," it said.

(Reporting by Jan Harvey; Editing by Sue Thomas)

(For more business news visit Reuters India)

FILED UNDER:

Religion and Politics

REUTERS SHOWCASE

Fund Raising

Fund Raising

Flipkart raises $700 million in fresh funding.   Full Article 

Reforms Push

Reforms Push

Modi may order insurance, coal reforms if vote delayed - officials.  Full Article 

Reuters Exclusive

Reuters Exclusive

India looks to sway Americans with nuclear power insurance plan  Full Article 

To Boost Growth

To Boost Growth

Crank up public spending to revive growth - chief economic adviser.   Full Article 

Bold Steps

Bold Steps

SpiceJet rescue plan marks bold bet on Indian aviation recovery.   Full Article 

New Airline

New Airline

Tata, Singapore Air venture Vistara to take off on Jan 9.  Full Article 

Online Sales

Online Sales

Knock knock. Who's there? Amazon's best-selling holiday author.  Full Article 

Hacking Attack

Hacking Attack

N.Korea says did not hack Sony, wants joint probe with U.S.  Full Article 

Reuters Poll

Reuters Poll

BSE Sensex to hit 32,980 by December 2015  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage