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Commerzbank: Gold Will Hit $1,900 This Year

By    |   Tuesday, 11 September 2012 10:00 AM

Gold will set a record high by early next year at the latest, commodity experts at Commerzbank predict.

Several forces will combine to push up gold, the Commerzbank strategists predict in a new research note, according to a Barron's blog.

One of these factors is that gold exchange-traded funds, which are now the fourth largest holders of gold and hold more than the central banks of Italy and France, will continue to see money flow into them, the strategist say.

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In addition, central banks purchased 254 tons of gold in the first six months of the year and might surpass last year's 458 tons of gold purchases. Developing world central banks are also now purchasing gold, while central banks in the already developed nations are selling little.

Moreover, supply is stagnant at around 1,060 tons, they explain, Barron’s reports. Mining, which added about 60 percent of total gold supply last year, might decline if labor strikes in South Africa's platinum mines spread to gold mines, and China is the only country producing a significant amount gold, yet it's also seeing increasing demand for the metal.

Other factors include speculators remaining interested in the metal, as net long positions have doubled sine mid-July, yet speculation has not gotten out of hand, and more quantitative easing from the European Central Bank and the Federal Reserve is likely.
Plus, China may roll its own easing to re-energize its slowing economy.

The approaching fiscal cliff and Europe's ongoing debt crisis continues to create political uncertainty, which is good for gold as investors seek a safe haven.

"In view of this underlying situation, we expect gold to continue on the upward trajectory upon which it has recently embarked," Commerzbank states in the report, according to Barron's. "By year’s end, gold looks set to climb to $1,900 per troy ounce, exceeding its September 2011 record in the first quarter of 2013 at the latest."

Approximately 15,000 workers went on strike at a South African KDC Gold Mine, joining about 28,000 workers on strike at the Lonmin PLC platinum mine, according to CNN.

"At this stage, the reason for the strike remains unclear, but we hope to gain clarity as soon as possible," Peter Turner, a Gold Field executive vice president, said in a statement, CNN reports.

"The situation in the mine has been calm and peaceful since the start of the strike, and we appeal to all stakeholders to continue to act with restraint and to engage in good faith."

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