Experts see gold hitting $1,200/ounce

The lure of gold as an asset is expected to draw most investors who have burnt their hands by trading in other asset classes like equities, mutual funds, and bonds. This is likely to keep gold prices on the higher side for rest of the year, industry participants said.

However, any recovery in dollar during the period is likely to weigh down on the yellow metal.

“Gold will trade higher for the rest of the year as we feel the existing problems in the global economy will continue to pressurise the dollar and all major asset classes,” Nikos Kavalis, senior analyst, GFMS said.

Most participants are of the view that gold will stay above $900 an ounce till the end of the year but may not touch fresh record levels.

“Price of gold will rise to $950 this year. I will not be surprised even if prices touch record $1,100-1,200 an ounce in the first quarter of 2009,” Kalpen Shukla, director, Khandwala Securities said. On Thursday, the most-active December gold on Comex was trading around $900 an ounce, down $10 from previous close.

Kavalis feels that dollar’s recovery is unlikely to happen before mid-2009, until then investment demand in gold will remain firm.

“Once the dollar starts to recover, investment demand will dip and gold will start softening in the second half of 2009,” the GFMS analyst said.

Apart from existing crisis in global markets, other factors that will boost investment demand in gold will be high inflation, rising energy prices, asset reallocation and risk diversification, analysts said.

Sahil Kapoor, associate, Edelweiss Bullion is extremely bullish on gold prices as he feels that heavy short covering, physical demand from India, China and West Asia will spur gold in the days to come.