$1,500 Gold Price This Year-Macquarie


"Investor demand for physical gold is exploding. . ."

The gold price surged higher Wednesday morning, rising $13.62 to $1,212.50/oz.. Just 2.9% off its record high of $1,249.50, the price of gold has rallied $46.20 off its low of just three trading days ago. Risk appetites returned to the market yesterday, driving stocks, commodities and precious metals higher—price action that appears set to continue today. Commodity currencies such as the Australian and Canadian dollars, which have been under pressure over the course of May, strengthened on the back of higher oil, copper, and gold prices.

Sentiment toward the broader commodity complex, as well as toward the gold price, has deteriorated lately as price declines soured investors' outlooks for global economic growth and for their willingness to buy anything other than government bonds. The research team at Macquarie Securities, led by analyst Steven Harris, told clients, "With everyone already bearish, the path of least resistance may be up. If the euro (which is clearly now seen as the risky asset at the heart of the European sovereign debt crisis) can manage to rally, will other risky assets be far behind?" The report also highlighted the tepid sentiment outlook for the gold price, noting that "We continue to see gold reaching $1,500/oz. this year."

Investor demand for physical gold is exploding and gold bullion ETFs are gaining in popularity. Sprott Asset Management announced yesterday a follow-on offering of 18 million trust units of the firm's Sprott Physical Gold Trust (PHYS)—with an underwriter overallotment option of 2.7 million additional units. The proceeds will be used to "acquire physical gold bullion," expected to amount to roughly 200,000 troy ounces of gold. The hedge fund magnate and successful resource investor, Eric Sprott, has not been shy about his bullish outlook for the gold price, telling CNBC on April 15 that his firm is essentially "all-in" with respect to gold and gold stocks.

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