Gold to climb to around $1,250 by Dec, new investment products to underpin price - analysts

October 7th, 2009

By Clara Denina

Gold prices are likely to rise to around $1,200/1,300 per ounce by the end of the year, with the dollar to remain weak and inflation pressure to return, analysts said on Wednesday.

And a continued proliferation of investment products will make gold more accessible to increasingly larger numbers of investors, with retail demand to rise sharply, they added.

"I'm quite confident the gold price will rise to around $1,250 by December," MKS Finance chairman Marwan Shakarchi said here at the Terrapin Commodity Week conference in London. "As long as the dollar continues to stay low, gold should benefit."

The gold price hit a fresh record high of $1,048.70 per ounce on Wednesday, benefitting from the plunging dollar and increased safe-haven demand.

"There are no technical levels above here and the gold price should reach $1,250 by the end of the year," Ross Norman of FastMarkets said.

"Gold will appreciate towards the $1,200/1,400 level in the last few months of the year on the back of a rapid deceleration of the purchasing power of the dollar," GoldMoney founder James Turk added.

The US dollar is heading for hyperinflation in the next few months, Turk said, which will underpin gold, traditionally seen as an hedge against inflation and currency risk.


Continued mistrust in traditional financial institutions is also believed to be encouraging investor exposure to physically backed exchange-traded funds (ETFs), while physical purchase of small bars at retail level are likely to take an increasingly higher share of the market, analysts said.

"The West is now learning from the East, where people prefer to own physical gold as opposed to paper gold," Shakarchi said.

"People prefer smaller bars to minimise the risk in their portfolio. That's why we have been approached by giant retailers like Harrods to sell gold bullion in their bank," he added.

"There is a lot of unmet demand for gold at retail level that will be only filled by shops starting to sell small bars in Western countries," Norman said.

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