Gold to Resume Uptrend on Sovereign Risk Fears


"The key driver is continuing global uncertainty, which seems to have little chance of abating."

Gold is set to resume its upward trend over the next month as concerns over eurozone sovereign debt and wider instability in the financial markets spark demand for the metal as a refuge from risk, a Reuters poll found.

A total 17 out of 24 respondents to the poll conducted earlier this month expect the precious metal to end this quarter above $1,200/oz. Six further respondents see prices holding in the metal's current $1,1501,200 range.

"Gold will remain well bid in the $1,2001,250 area as risk levels for further sovereign credit deterioration remain high," said Greg Orrell, portfolio manager of U.S.-based OCM Gold Fund.

Of the 26 respondents who forecast ranges for the end of the year, the picture was even brighter, with 21 forecasting gold prices at record highs above $1,250/oz. Dollar-denominated prices hit a historic high in mid-May at $1,248.95/oz.

Of the larger U.S. banks, Goldman Sachs and JP Morgan see prices ending the year in the $1,200$1,250 range, while Bank of America-Merrill Lynch forecast an end-2010 range of $1,2501300.

The lowest forecasts came from the UK's RBS Global Banking & Markets, who predicted gold would end both the first half and the full year in the $1,1001,150 range.

Six respondents expect spot gold to trade above $1,400/oz. by year-end.

"(The) key driver (is) continuing global uncertainty, which seems to have little chance of abating," said one of these, Charles Kernot, director of metals and mining at London's Evolution Securities.

"People are becoming more concerned about government abilities to finance country budget deficits, and there is essentially no cash to provide a second raft of bailouts."

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