Investment bank Goldman Sachs raised its forecast for the price of gold to reach $1,000 an ounce in the next three months from its previous forecast of $700 due to rising investor demand for safe haven assets.
'The gold price rally has been driven by surging demand for gold in all forms: physical gold, exchange-traded funds (ETFs), and futures contracts as investors seek 'a safe store of value' amid the financial distress and inflation risks,' it said in a report.
It also noted that a strong relationship between the price of gold in US dollars and the exchange rate of the dollar against other currencies has begun to break down.
Gold was trading at $903.15 an ounce by 0038 GMT, down $1.70 from New York's notional close but was within sight of a near four-month high of $930.40 an ounce hit last Friday. Gold struck a record at $1,030.80 last March.
Selling of scraps persisted in Asia, driven by gold's recent rise to above $930 as well as fears of falling demand for jewellery during the global economic downturn. Jewellery accounts for nearly 70 percent of global demand.
'Gold prices continue to hold around the $900 zone and the ongoing financial crisis is giving enough fodder to prevent a major slide,' said Pradeep Unni of Richcomm Global Services in Dubai.
'There's still some physical selling around. After the Chinese New Year, people continue to sell gold to take profits,' said Dick Poon, manager of precious metals at Heraeus in Hong Kong.
'The global economy is not doing well. They continue to reduce their inventories,' said Poon, referring to selling from manufacturers.
