Prices destined for $1,300 in the next six months, Goldman forecasts
By Cynthia Lin, MarketWatch
NEW YORK (MarketWatch) -- Gold futures brushed past the $1,200-an-ounce mark Thursday, gaining more than 1% after a government report showed U.S. jobless claims rose last week and as investors remained jittery about the health of the global economy.
Trading near its session high, gold for December delivery recently changed hands at $1,215.30 an ounce, up $16.10, on the Comex division of the New York Mercantile Exchange.
Before the bell, the Labor Department said first-time filings for jobless benefits increased 2,000 to 484,000 in the latest week. Economists had expected claims to decline.
"All of a sudden gold has a bit of a safety flight going on for it with the equities a lot shakier than ... a few days ago," said Frank Lesh of FuturePath Trading in Chicago. He sees upside potential for the metal to $1,235 an ounce.
Despite the recent strengthening of the dollar, gold prices were buoyed by its safe-haven appeal as investors reacted to soft economic data coming out of the U.S. and China.
"What you're seeing here are two crowds buying in," said senior analyst Adam Klopfenstein at Lind-Waldock. "We're rallying off the flight-to-quality crowd with short-term developments," while what he called the "long-term buyers" are keying on expectations for inflation down the line.
Meanwhile, continued increases of physical holdings in exchange-traded products -- as reflected five straight days of inflows -- also have served to prop up the precious metal's price, according to analysts at Barclays Capital.
On Tuesday, SPDR Gold Trust (GLD 118.75, +1.41, +1.20%) , the world's largest gold-backed exchange-traded fund, posted an inflow of 3 metric tons.
Physical demand from India, the world's largest gold consumer, is expected to perk up as well with the coming of festival season.
Looking ahead, analysts at Goldman Sachs said they consider the metal oversold, in line with projecting prices would hit $1,300 an ounce in the next six months.
Additionally, Goldman economists expect the Federal Reserve to return to quantitative easing late this year or early in 2011, further supporting gold prices. See latest on this week's move by Fed policy makers to prop up the U.S. economy.
"We believe that a return to quantitative easing could act as a strong catalyst to carry gold prices to higher levels," they said in a note issued Wednesday.
Richcomm Global analyst Pradeep Unni also sees gains in store for gold.
"Gold has climbed 9.3% this year and is set for its tenth straight annual advance," said Unni.
That would mark "the longest winning streak since at least 1920, as investors shield their wealth against economic turmoil and the prospect of currency debasement," the analyst told clients.
