Dow Jones

Gold Likely To Hit "North Of $2000" - Citi Strategist

November 27th, 2008

By: James Campbell

Gold is likely to hit $2,000 an ounce regardless of the long term macroeconomic scenario that unfolds, Citigroup said in a research note dated Wednesday.

"For those who refer to gold as 'That useless piece of yellow metal that has no real value and earns nothing' (And have done for years) they might want to look at financial market charts more closely," Tom Fitzpatrick, chief technical strategist at Citigroup in New York, said in the note.

The report said that from a technical standpoint gold is still firmly in a bull market. It points to charts of gold against various asset classes including equities, fixed income and commodity currencies like the Australian dollar, that show the yellow metal is breaking out to the upside.

"We continue to believe that a move of similar percentage to that seen in 1976-1980 bull market can be seen which would suggest a price north of $2000."

The report cautioned that it is not forecasting an imminent move towards $2000, but argues that it's a scenario that is likely to unfold in the next few years regardless of the success of the monetary and fiscal bailout of the global economy.

If the global economy is successfully reflated by the massive fiscal or monetary stimulus being injected, it says, then gold will benefit via inflation.

In the event that the rescue and bailout policies prove unsuccessful then further economic instability could lead to political instability in some nations and possibly even domestic or regional unrest, in which case gold will benefit from its safe haven status.

"Considered opinion is that all the gold in the world can fit in a 25 square meter cube so even a relatively modest a change in the supply and demand dynamics could result in an outsize move in price," said the report.

At 0340 GMT spot gold was at $815.45/oz, up $9.35 since the New York close. It reached a record intraday high of $1,032.35/oz on March 17.

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