Gold increased to new highs in Asian trading overnight, as the markets continue to be dominated by the twin threat of the eurozone debt crisis and a slowing in the global economy.
Bullion for immediate delivery rose to $1,913.50 an ounce briefly, the first time it has passed the $1,900 mark. According to Bloomberg, the metal is currently trading at $1,882.4 an ounce at 9.17am.
Metal strategists at Citigroup increased their price forecasts for gold on the back of the move, lifting their 2011 expectation from $1,440 to $1,590 and their 2012 prediction from $1,325 to $1,650.
The strategists tell MarketWatch: “Fears about sovereign defaults and currency debasement have left many investors concerned about switching from equities into government bonds and cash hardly looks an attractive alternative when real rates are negative. Gold has therefore been the main beneficiary of all these concerns.”
However, they maintain the recent gains in the price of the commodity are unlikely to be unsustainable over the long term.
Other analysts say the high demand for gold is being driven by the speculation that new stimulus measures could be announced by the US Federal Reserve this week.
Speaking to the BBC, Ong Yi-Ling, an investment analyst at Phillip Futures, points out that QE2 was developed at last year’s Jackson Hole summit of central bankers. With the 2011 meeting taking place this week, Ong says the market is hoping similar measures will be unveiled when Ben Bernanke, the governor of the Fed, gives his speech on Friday.
Meanwhile, Darren Heathcote, the head of trading at Investec Bank (Australia), tells Bloomberg that the price of gold could be pushed even higher in the weeks ahead, as the market is currently “very, very skittish”.