Spot gold prices firmed up by almost $8 this afternoon and were trading at $1,649.42 per ounce at 12.22pm UAE time in a range-bound market even as global equities moved up on hopes that the Eurozone’s efforts to prop up its ailing banks could work.
Despite a volatile spot market over the past couple of weeks, gold prices have not dipped below the $1,600-mark for any significant duration of time, suggesting that investors believe that that is a reasonable price-point for the yellow metal at this stage.
Moreover, putting a base for the safe haven metal’s price are analyst forecasts that are still sticking to $2,000 per ounce within a 12-month period.
“Gold prices have fallen in recent weeks in a broad-based liquidation of positions across various markets and asset classes,” Bank of America Merrill Lynch notes in its just published Global Metals Weekly. “Nevertheless, we note that assets under management at some vehicles like physical ETFs have been relatively steady. This is one reason we believe that the recent correction did not reflect a general reassessment of gold’s fundamentals,” the BofA ML analysts noted in the report.
“Given continued debt issues in advanced nations and both structural and cyclical headwinds to growth with all the implications these have for FX and interest rates, we maintain our 12-month gold price target at $2,000/oz as the global macroeconomic backdrop remains supportive,” the report further said.
However, the bank maintains an average price-target of $1,650/oz for gold in Q4 2011, and sees it averaging $2,000/oz only by Q4 2012.