Monday, September 29, 2008

Barclays Capital sees gold heading to new highs

BarCap sees "perfect storm" for fresh gold spike
Mon Sep 29, 2008 11:04am IST

KYOTO, Japan, Sept 29 (Reuters) - A near "perfect storm" has reformed in the gold market that should drive bullion to new record highs within the next six months, fuelled by a mix of anxious uncertainty and a weaker dollar outlook, a Barclays Capital official said on Monday.

While gold prices may weaken briefly if other markets rally in relief once U.S. legislators gave the greenlight to a $700 billion bailout of the financial system, a reconsideration of gold's merits should propel it beyond the March record of $1,030.80 an ounce, says Jonathan Spall, a director in BarCap's commodities division.

"I think we should make new highs .. .within the next six months, I would've thought," he told journalists at the London Bullion Market Association's annual conference in Kyoto. "We should be in a perfect storm for gold."

The U.S. and European governments have stepped in this month to bail out major banks and financial institutions whose near collapse under the weight of toxic debt triggered the worst crisis in decades and threatened to wreck the world economy. "I was always very sceptical of the argument of gold as a safe haven, but that has changed dramatically for me and for others -- now it's financial institutions themselves that are under threat," he said.

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