Gold prices may cross $1,500 mark by end-2011

Gold will average $1,100 an ounce this year and it could attain a price of $1,500 by the end of 2011, according to a commodities' analyst.

Gold, which has a strong correlation with the greenback and crude, will need the support of oil prices at $ 100 a barrel to attain and cross the $ 1500 an ounce level, Francisco Blanch, Head of Global Commodity Research with Bank of America Merrill Lynch told Emirates Business.

The yellow metal will enjoy support from an inclination of reserve banks in the emerging economies to boost the share of gold in their reserves, he said.

"You have a multi-trillion dollar foreign exchange reserves from emerging economies chasing spot gold markets which fare in billions of dollars. The percentage of reserves in gold of emerging economies is still 1.5 to two per cent of their total reserves. The reserve managers will certainly want to increase this," said Blanch.

A purchase of 100 tonnes of gold by a prominent reserve bank has the potential to raise gold's price by $45 an ounce, Blanch said. "You can predict the price of gold almost accurately if you know what's happening to the dollar, what's happening to commodities and what's happening to oil. Gold captures the shocks from the equity and the commodities markets," Blanch said, adding: "When India purchased 200 metric tonnes of gold in November, prices rose by $90 a tonne."

Meanwhile, platinum "shined the most" as the economies the world across emerge out of a recession, Blanch said.

While the precious metal which finds extensive use in car manufacturing industry will average at $ 1750 an ounce this year, it will average at $ 2000 an ounce the next year, he said.

"On one hand, it [platinum] has the tail-wing of gold. On the other, it is backed by industrial demand which is rising," he said.

Speaking on copper which drives the base metals market, Blanch said that he expects that the metal's price will average $7,125 a tonne.


Prices of metals

Francisco Blanch, Head of Global Commodity Research with Bank of America Merrill Lynch, who predicted oil price to touch $147 in 2008, is now saying that gold will hit $1,500 an ounce next year. Excerpts from an exclusive interview:


How will gold's price fare this year and what's driving the market?

Gold prices will average at $ 1,100 an ounce in 2010. A demand from reserve banks of emerging economies will drive the demand for the metal.

How will platinum prices perform in 2010? What will drive this precious metal?

While the precious metal which finds extensive use in car manufacturing industry will average at $1,750 an ounce this year, it will average at $2,000 an ounce the next year. Platinum will rise along with gold.

Demand in industries will drive its demand.

What about copper?

The metal's price will average $7,125 a tonne this year and $8,000 a tonne the next year.

What will be the rise in demand for oil this year? How will the crude prices fare?

The global demand for oil will rise two million barrels a day this year. Crude will average at $85 a barrel in 2010 and it will potentially rise to $90 a barrel by the third quarter this year. The prices may cross the price band of $ 100 a barrel in the first quarter of 2010.

What will be the global GDP growth in 2010 and in 2011?

The world's gross domestic product will grow at 4.43 per cent in 2010 and 4.6 per cent in 2011.

 

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