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Mumbai: Gold prices could cross $700 an ounce by the year-end, as investors buy the metal to insulate themselves from weakening returns in other asset classes, industry experts said.
But prices would dip after reaching that level next year, the experts attending a gold convention said.
On Friday, gold traded at $660.95 an ounce at around 0210 GMT, up from $640 at the beginning of the year. Prices had hit a 26-year high of $730 an ounce in May last year.
"We think the price of gold will be $700-$730 an ounce by the year-end," said Tom Pawlicki, precious metal analyst with Man Financial Global, on the sidelines of a gold conference in the Indian city of Mumbai.
He said the metal had lost some of its appeal as a safe haven in the wake of the recent liquidity troubles in credit and equity markets, but was still going to be used as a hedge against geo-political risks.
"I believe gold prices have a very real chance of touching $700 before the end of the year," said Paul Walker, the chief executive officer of GFMS.
"My view is that the groundwork is in place for a sustained rally."
Walker said the US economy was too highly leveraged on an "increasingly problematic housing market" and the revenue deficit in the country's economy was also going to affect gold prices.
"The outlook for traditional investments in bonds and equities is questionable. Equity prices could fall further," he said. "Part of the money will diversify from equities and fixed income [and come into] gold."
Economic uncertainty
Walker added that the timing of the rally would depend on when investors realise that some of their stocks are overvalued and economic uncertainty spills over to areas like jobs and industrial production.
A banker at the convention said the prices were going to rise, but was going to be lower than $700.
"We are bullish. By December-end. prices should be $675 to $680 an ounce," said Rajan Venkatesh, director, India bullion of Bank of Nova Scotia.
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