By Jan Harvey
Analysts estimate gold price to average $930 in 2009 and reach $975 next year.
Gold prices are set for solid gains this year and next, with the $1,000 mark in sight, as potential inflationary concerns and a softer dollar outlook prompt analysts to ramp up forecasts, a Reuters survey showed.The poll of 48 analysts and traders showed that expectations for gold prices this year have risen 7.8 percent to a median $930 from $862.50 in a similar survey carried out in January, when fears over the economic outlook were at their height.
Expectations for prices of the more industrial precious metals - platinum, palladium and silver - have risen still further, with hopes for an economic recovery helping allay fears demand would continue to tumble.
"We think gold will get $1,000 in its sights again (by year-end)," said RBS Global Banking & Markets anlayst Stephen Briggs. "There is clearly a risk of inflation building up and there are clear risks of the dollar weakening sharply."
"We're looking at lower central bank sales than we've had, static, stagnant mine production and, if the world economy picks up, there will also be a pick-up in jewellery demand."
Gold has already performed solidly so far in 2009. Spot gold was bid at $935.65 an ounce at 0906 GMT on Thursday.
Median forecasts for the yellow metal stood at $930 an ounce in the third quarter of this year, moving up to $951 an ounce by the last quarter as seasonal demand weakness eases and the economy picks up.
Gold prices are seen rising further in 2010, with the median forecast climbing to $975 an ounce. The 2010 forecast is 13 percent above the price view for the same year given in January, of $862.50 an ounce. On the U.S. COMEX gold futures market, the June 2010 contract was trading at $943.50 per ounce.
Comments from the analysts polled suggest expectations for dollar weakness were largely behind rising optimism towards gold, on fears a rise in U.S. debt issuance to bankroll the economic recovery could weigh on the currency.
They said quantitative easing measures could lead to rising inflation. Gold is often seen as a hedge against rising consumer prices.
Additionally, jewellery demand, which has been particularly weak in recent months due to a combination of falling consumer spending linked to the global economic downturn and higher prices, was expected to pick up as the economy revives.
Traders said they were already seeing signs of recovering demand in the Middle and Far East, though Indian buyers continued to hold out for lower prices.
The median forecast for silver has risen still further, climbing 18 percent to $13.59 an ounce from $11.50. Spot silver was at around $13.24 an ounce on Thursday.
Next year silver prices were on average expected to rise to $14.25 an ounce, the poll showed. This too was significantly above January's forecast for 2010 of $13.00 an ounce.
The metal is industrial in use as well as being a precious metal -- it is widely used in electronics manufacturing -- and as such is more sensitive than gold to economic activity.
Rising industrial commodity prices and the relative illiquidity of the market meant silver outperformed gold in the second quarter, but could also fall further than the yellow metal if the market turns bearish.
"Silver's dependence on gold is expected to continue: should gold fall afresh, buying support from the industry and private investors - which we have observed it the recent past -- will not be able to prevent the white metal from falling further," said Wolfgang Wrzesniok-Rossbach, head of sales at Heraeus in Germany.
Why is gold becoming more expensive to buy? Have we mined all the gold in the planet? It has been told in the past that when gold prices rise, that means war is a-foot. How do we interpret prices rising? Australia once sold a portion of its reserve of gold, which in turn caused a great disaster in gold reserve value in the world. So now everyone is stocking up in gold but for how long?