Gold to Gain Through 2012, Morgan Stanley Forecasts

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"A globally synchronous and aggressive fiscal and monetary stimulus may be needed to re-inflate the global economy, and we think this continues to present significant upside to gold prices."

Gold may average higher for each of the next three years and climb to a record driven by increased demand and a declining dollar as governments ramp up spending to battle the global recession, according to Morgan Stanley.

The metal may average $900 an ounce this year, up 20% from an earlier target of $750, the bank said today in a report. It may average $1,000 in 2010, $1,050 in 2011 and $1,075 in 2012, up as much as 34% from previous estimates, the report said. The commodity peaked at $1,032.70 on March 17.

"Devalued currencies, growing global incomes and a renewed appreciation for gold should keep prices higher," Morgan Stanley's New York-based analyst Hussein Allidina wrote. "A globally synchronous and aggressive fiscal and monetary stimulus may be needed to re-inflate the global economy, and we think this continues to present significant upside to gold prices."

Gold climbed for an eighth year in 2008, gaining 5.8% "in a year when most other asset classes saw double-digit losses," Morgan Stanley's Allidina wrote. "The U.S. dollar should weaken as the global economy recovers."

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