Citigroup Warns of Waning Gold Investment, Seasonal Slack but Positive Long Term

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Despite being in the waning stages of a potent macro-drive investment demand, Citigroup is standing pat on its average forecasts of $900, $950, and $1,000 gold over 2008-2010, adding that "prices could move considerably higher than these levels in a full-blown U.S. recession."

Citigroup analysts John H. Hill and Graham Wark Monday said that, while they remain positive on gold for the long term, the precious metal is now entering "a period of seasonal slack for physical/fabrication demand" that has already been pinched in Indian/Asian markets. "Unless dramatic new macro negatives enter the market to re-kindle investment demand, it is difficult to see near-term catalysts," they suggested.

"Gold briefly set a series of record highs above $1,000/oz, but in the process unleashed forces that make further near-term gains difficult," the analysts noted. "Gold seems to be in the waning stages of a potent pulse of macro-drive investment demand, with fabrication fading due to seasonality and price-elasticity effects."

Nevertheless, Citigroup is standing pat on its average forecasts of $900, $950, and $1,000 gold over 2008-2010, adding that "prices could move considerably higher than these levels in a full-blown U.S. recession."

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