Top Gold Forecasters See Rally to Record by March

The most accurate forecasters say gold will rebound from its biggest monthly plunge since 2008 and reach a record by March because economic growth is stagnating and Europe’s debt crisis is unresolved. Futures traded in New York may rise 13 percent to $1,950 an ounce by the end of the first quarter, according to the median of estimates compiled by Bloomberg. The predictions are from eight of the top 10 analysts tracked by Bloomberg over the past eight quarters. Two declined to give forecasts. Holdings in exchange-traded products backed by bullion rose the most in three months in October, and the most-widely held option gives owners the right to buy gold at $2,000 by Nov. 22. Demand for the metal accelerated since May as slowing growth and mounting concern that European leaders will fail to contain the region’s debt crisis caused $7.5 trillion to be erased from the value of global equities. “There is a loss of trust in the entire financial system and urgent need for safe-haven investment,” said Ronald Stoeferle at Erste Group Bank AG in Vienna, the second most- accurate forecaster in the past three months. “The environment for gold is just perfect.”

Fed Vice Chairman Janet Yellen said on Oct. 21 that a third round of large-scale securities purchases may become warranted to boost the economy. The central bank bought $2.3 trillion of housing and government debt during two rounds of so-called quantitative easing from December 2008 to June 2011, spurring a 70 percent jump in the price of gold. Investors aren’t the only ones buying bullion. Thailand, Bolivia, Kazakhstan and Tajikistan were among nations adding gold to their reserves in September, International Monetary Fund data show. Central banks are expanding reserves for the first time in a generation. Switzerland’s central bank said Oct. 31 it returned to a profit in the first nine months as gold holdings helped counter losses on currency reserves. “There’s huge potential for gold in the coming years,” said Jochen Hitzfeld, the analyst at UniCredit SpA in Munich who was the most accurate tracked by Bloomberg in the past two years. “Investors are buying gold. That’s reinforced by buying from central banks. Prices did run up a little bit too fast, but the drop was just a breather.” “When we look at gold five years from now, we will say gold was wildly cheap,” said Jason Schenker, the president of Prestige Economics LLC in Austin, Texas, and the fifth-best forecaster tracked by Bloomberg. “What happens to gold is going to hinge on what happens to the dollar, and that is going to be influenced by what happens in Europe and monetary policy.”

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