Gold Predicted to Hit US$1,500 by December

Alia McMullen

Filed under: Financial Crisis, Investing

Gold is predicted to rise for a 10th straight year in 2011, making it the longest rally in 90 years, forecasters say. According to a Bloomberg article in the Financial Post, some top gold forecasters expect the yellow metal to rise 18% to about US$1,500 by December.

It's a staggering outlook, but given gold's recent performance, it's one that may just play out. Gold is up 13% since the beginning of the year at about US$1,248. On June 21 it hit a record high of US$1,266.50.

Many analysts and professional investors cringe when they admit they expect the price of gold to rise, especially from its current levels. Being a "gold bull" in the investment community comes with a stigma. This is basically because gold usually performs well when everything else is going to pot.

However, Eugen Weinberg, a gold analyst at Commerzbank AG in Germany told Bloomberg that he expects gold to rise regardless of economic performance. His opinion holds some weight because he was the most accurate gold-price forecaster in the first quarter of this year.

"A stronger economy would create more jewellery demand," he said. "If the economy stays weak or gets worse, then investors will be looking for a safe haven."

According to Bloomberg data, investors have bought almost 278 tonnes of gold worth about US$10.4-billion this year. One of the biggest buyers has been billionaire investor George Soros. Mr. Soros describes gold as the "ultimate asset bubble." He says buying at the start of a bubble is "rational." Perhaps that is so, but the tricky part is knowing when to get out. The price of gold has varied significantly throughout history. It will fall again. But for now, the analysts think it still has an upside.

While most analysts agree that the price of gold will likely rise this year, Bryan Novak, an analysts at Astor Asset Management LLC, warns that investing in gold has its risks. His investment firm sold out of gold at the end of last year and moved the money into silver and copper.

"We don't believe we're heading into a double-dip recession," Mr. Novak told Bloomberg. "Gold carries some risk because a lot of people are piling into the trade."

Some analysts also believe the price of gold may dip in the short-term as investors take profits on recent highs.

You can check the latest gold price at Gold.org.