Higher Inflation to Push Gold to $1,000 Says RBC

Source:

RBC Capital Market's equity research division said in a recent research note that it maintained its longer-term bullish outlook for gold as it believed increased inflation expectations were not priced into the commodity.

RBC Capital Markets believes the gold price will reach $1000/ounce or "perhaps significantly higher" later this year and into 2009 as inflation will rise in Asia and the Middle East and the US dollar will remain weak in a Fed rate cutting cycle.

The bank's equity research division said in a recent research note it maintained its longer-term bullish outlook for gold as it believed increased inflation expectations were not priced into the commodity. We expect investment and macro fund buying to push gold through the $1000/ounce level over the next few months," said RBC.

However, the bank highlighted the risk that without any follow-on physical demand for gold, particularly out of India, the Far East and the Middle East - accounting for 70% of annual physical demand for gold - significant physical selling could occur...

RBC believed any IMF gold sales were likely to occur in an "orderly fashion" and possibly as part of the current European Central Bank (ECB) gold sales programme of 500t/year...

The bank believed that given current strong institutional and retail investment demand for gold, the bullion market could absorb any IMF gold sales within the context of the current ECB gold sales programme.

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