Gold will lead a rally in commodities next year as Europe’s sovereign-debt crisis continues to roil financial markets, spurring demand for the metal as a haven asset, according to Morgan Stanley.
“There’s a very strong chance that gold will re-challenge successfully the all-time high,” said Morgan Stanley Australia chief metals economist Peter Richardson, who has studied the metals markets for more than two decades. Bullion may climb to a record US$2,200 an ounce in the first half, he said in an interview.
Gold is rallying for an 11th year, gaining 24 percent, as investors seek to protect their wealth from declining equities, depreciating currencies and the threat of inflation. While billionaire John Paulson cut his stake in the SPDR Gold Trust in the third quarter, he is still the biggest holder. Central banks will continue to be net purchasers, according to the producer-funded World Gold Council.
The eurozone crisis shows no sign of being “close to a resolution” and the contagion risk spreading across Europe is just the beginning, Richardson said in Singapore on Wednesday.
“A significant withdrawal of credit, write-downs on balance sheets, these are not good developments for financial markets generally and it’s very hard to see how this can end well,” he said.
Gold for immediate delivery, which reached a record US$1,921.15 on Sept. 6, traded at US$1,765.20 at 3:24pm in Singapore yesterday.
Net purchases by central banks totaled 199.6 tonnes this year, data available at the end of September showed, compared with 67.1 tonnes in all of last year, the council said on Oct. 26.
Gold demand this quarter is “still very strong,” World Gold Council managing director for investment research Marcus Grubb said on Bloomberg TV’s Countdown with Owen Thomas.
Gold is being used to pay for losses in other markets so “that’s why gold is sitting in a range until we see more clarity” on the European debt crisis, he said.
Goldman Sachs Group Inc expects raw-material prices to advance in the next year. The S&P GSCI Enhanced Commodity Index will climb 15 percent led by industrial metals, it predicts.
“We maintain our view that global growth will provide enough support to demand to drive key commodity prices higher,” even with the European crisis, Goldman Sachs global head of commodities research Jeffrey Currie said on Monday. Gold will be at US$1,930 an ounce and copper at US$9,500 a tonne in 12 months, the bank said.
Consumption across Asia has been “one of the powerful drivers” of investment demand for gold, Richardson said. China will overtake India in the next couple of years as the largest bullion consumer, he said.
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