Citigroup Metals Analysts Ask Why Gold Is Not Already at $2,000/oz.

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In an analysis published Wednesday, John H. Hill and Graham Wark suggested, "Gold appears to be entering a powerful new phrase of investment demand tied to safe-haven and monetization themes."

Citigroup asserts that gold will benefit from both the "gloom & doom" and "muddle-through & monetization" scenarios, possibly regaining $1,000 per ounce at year-end and even doubling or tripling in the long term.

"Frankly, we're surprised, that gold is not already at $2,000 an ounce," declared Citigroup analysts John H. Hill and Graham Wark.

In an analysis published Wednesday, Hill and Wark suggested, "Gold appears to be entering a powerful new phrase of investment demand tied to safe-haven and monetization themes."...

"It is notable that hard-core goldbugs have been proven correct in the decade-long contention that an overwhelmingly vast and complex pool of nested financial derivates would ultimately result in cascading defaults and ruin for major portions of the banking system. Frankly, we're surprised that gold is not already at $2,000 per ounce."...

"The forces that have propelled gold for the past five years are firmly in place, and policy prescriptions for the credit crisis seem powerfully and uniformly re-flationary...

The analysts forecast that the gold price will go higher through 2009-10 and maintain year-average forecasts of $950/1,000 per ounce. "Should the macro environment deteriorate more seriously than Citi economists expect, we would not be surprised to see gold climb to multiples of these levels. In the near term, we expect gold to be highly sensitive to macro developments, given the potential for safe-haven investment demand to ride on top of seasonal strength in physical fabrication offtake."

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