Gold could strike record 1,100 dollars

Photo : AFP
LONDON, April 8, 2009 (AFP) -The gold price could rise to a record above 1,100 dollars an ounce in the coming months, as investors seek to guard against rising inflation, precious metals consultancy GFMS said this week.

"The consultancy believes (gold) could easily re-attain the 1,000-dollar mark and may well push up towards and perhaps even through the 1,100-dollar barrier," GFMS said in its annual Gold Survey that was published on Tuesday.

"The report singles out the fiscal and monetary policies currently being enacted, especially by the US administration, as the root cause... through their ability to generate inflationary pressures," GFMS added.

"GFMS also expect central banks to be reluctant to raise interest rates whilst the prospects for economic growth are shaky."

Gold benefits from the prospect of higher inflation because it is widely regarded as a safe-haven investment that can preserve value amid troubled economic times.

However, on Monday gold prices fell as low as 865 dollars per ounce -- a level last seen on January 23 -- as the market was rattled by the prospect of the IMF selling some of its reserves.

But in the London Bullion Market on Wednesday, prices rose to 887 dollars an ounce, from 879.75 dollars an ounce late on Tuesday.

GFMS added in the report: "The consultancy... cautioned that it may well not be a straight-line rally as a summer lull or the need for inflationary pressures to build could mean sub-900-dollar prices in the short term."

Gold prices are currently trading below the record high points forged last year.

The glamorous metal, which is used in jewellery, dentistry and electronics, had struck a record high of 1,032.70 dollars an ounce on March 17, 2008.

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