Scotia Capital: Gold Up Trend Will Continue into 2009

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While Scotia Capital believes gold prices will remain volatile, it expects the current uptrend will continue into 2009 and has upgraded its forecasts accordingly. Scotia has increased its 10-year average gold price by 13.6% to $844 an ounce from $742, with its long term forecast climbing 12.5% to $675 from $600.

It may be a little early to point to seasonal trends for gold’s recent rally that came after a 15% pullback since March’s peak, but there are several factors behind the positive swing in speculative investor demand, Scotia Capital said in a report. These include strong fall trends for bullion beginning in September, gold’s appeal as an inflation hedge given elevated oil prices, forecasts for higher interest rates from central banks, troubles for global financial companies and the negative impact this has on the U.S. dollar, and finally the recent rebound for gold ETF holdings and increase in the net speculative position.

While the firm believes gold prices will remain volatile, it expects the current uptrend will continue into 2009 and has upgraded its forecasts accordingly. Scotia has increased its 10-year average gold price by 13.6% to $844 an ounce from $742, with its long term forecast climbing 12.5% to $675 from $600. It has also boosted its 10-year average silver price by 11.6% to $15.36 per ounce, while its long-term target remains at $12.

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