Santo Mining Corp (SANP)

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Gold forecast to hit new high in 2012
By Jack Farchy in London

http://www.ft.com/cms/s/0/52eb8042-387f-11e1-9ae1-00144feabdc0.html#axzz1tzbvtyGD

Gold will recover from its current malaise and hit a new record high in excess of $2,000 a troy ounce in 2012, according to an annual survey of industry predictions by the London Bullion Market Association.

The forecasts from 26 of the largest bullion-dealing banks and trading houses highlight the almost undimmed bullishness about gold among precious metals analysts and traders despite a punishing price fall in recent months.

All but three forecasters predicted that gold would in the course of this year surpass the nominal record high of $1,920.30 touched in September, and most said that it would exceed $2,000.

According to the predictions collected by the LBMA, gold will trade between $1,443 and $2,055 this year, averaging $1,766.

Despite the general bullishness, however, several analysts have downgraded their gold forecasts in recent weeks in response to the sharp fall in prices towards the end of the year. HSBC cut its forecast for the 2012 average gold price from $2,025 to $1,850, while Barclays Capital lowered its forecast from $2,000 to $1,875.

Gold hit a six-month low of $1,521.94 in December, in the process dropping below its 200-day moving average, a technical indicator closely watched by some traders and investors, for the first time in almost three years.

The precious metal was under pressure from a dash to cash amid banks and investors, while physical demand in India and China also weakened, although traders say it has picked up in recent weeks. On Friday gold was trading at $1,621.90, up 6.5 per cent from its mid-December low.

UBS, which was the most accurate gold forecaster both last year and in 2010, was the most bullish of the analysts, predicting that gold would average $2,050 over the course of the year and reach a peak of $2,500.

Edel Tully, the bank’s precious metals strategist, cited stress in the sovereign debt markets, a likely recession in Europe, low interest rates, central bank gold buying and the lack of compelling investment alternatives as factors that should support gold. She added: “It is the potential direction of European policy – if quantitative easing materialises – that will determine just how explosive the price moves could be.”

Moreover, investor positioning in gold is the least bullish since April 2009. “With the gold space far from crowded, when the tide turns, it would take a relatively small showing of support to cause the price to move quickly,” Ms Tully said.

The analysts also predicted gains for the other precious metals. Silver is forecast to average $33.58 a troy ounce this year – up from Friday’s price of $28.75 but below last year’s average of $35.11. Platinum is predicted to average $1,624, compared with $1,400.25 on Friday, while palladium is expected to trade at an average of $735.52, compared with $624.72 on Friday.

David Jollie of Mitsui Precious Metals, last year’s most accurate silver forecaster, said: “Amongst the precious metals, end user demand seems most robust for palladium with demand for silver and platinum being less positive.”

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