Gold Could Hit $1200 by 2009

Source:

Gold prices could move sideways in the near term and may not make much of a move in the next two quarters, but they should turn upward after that, according to Martin Murenbeeld, chief economist at DundeeWealth Economics.

Gold prices could move sideways in the near term and may not make much of a move in the next two quarters, but they should turn upward after that, according to Martin Murenbeeld, chief economist at DundeeWealth Economics.

In a note he told clients:

These projections may be considered somewhat bearish by some readers, but we assure them that the medium and long-term outlook remains quite bullish indeed.

Mr. Murenbeeld said several issues remain for gold such as the market's focus on the euro-dollar exchange rate that may keep gold in check when the euro declines against the greenback.

Then there is the U.S. recession. He noted that commodities, in general, do not do well during U.S. recessions, and nobody can be sure there is a complete decoupling in the global economy. Mr. Murenbeeld also sees a pause in gold and commodity prices developing as the middle of this long cycle arrives...

Meanwhile, the large amounts of liquidity entering the financial system and pressure on other commodities should ensure that gold rises significantly higher, he predicted, adding that the supply argument for gold is becoming even stronger as mine output has not looked like it will rise before 2010 or so for quite some time. However, he added that there remains a small possibility that miners will respond faster to the higher gold prices of recent times than they have in the past.

Among the scenarios Mr. Murenbeeld laid out for gold prices, the most likely one is where the U.S. dollar index falls about seven points from the first quarter of 2008 through the third quarter of 2009. And this suggests gold prices will be in the range of $850 to $950 per ounce at the end of that period, he noted.

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