Gold is edging back up after hitting a low under $900 per ounce this week as market watchers continue to fret about the state of the global economy. Where will gold go next? The predictions are wide-ranging; UBS analyst Daniel Brebner says in the current environment gold could go as high $2,500 but also says in his worst case scenario gold could go as low as $500 per ounce. Brebner believes the market is ill prepared to deal with any policy misfires and the prospects for inflation or deflation are extreme. 'There is a not inconsiderable threat that an underestimation of the risks to global growth and the impact of poor financial liquidity, combined with the toxicity of credit-linked assets, could result in a continuation of the deflationary pressures already growing in the global economy,' he said. However Brebner also said an overestimation of, or perhaps more accurately an over-compensation for the current deflationary threat, could potentially result in high levels of inflation, or even the contemplation of hyperinflation. 'The high potential for policy error is generating considerable interest in certain assets which are perceived as ‘stores of value’ including gold,' Brebner said. He said gold would only fall below his worse case scenario if inflation volatility fell to historical lows in a strong dollar environment; in this instance gold could fall to $400/oz.

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