Citigroup ups gold forecast

Financial services giant Citigroup has increased its long-term outlook for gold prices.

In a note to clients, metals analyst John Hill said that gold bullion could see further growth on the back of ongoing fears over a US recession and the effects of the global credit crunch, Reuters reports.

Overall, the forecast for average gold prices was increased to $900 an ounce in 2008 from $750, with 2009 expected to see average prices of $950 compared with the previous prediction of $800.

Meanwhile, an average $1,000 an ounce price is expected for 2010. The revised outlook comes shortly after Randgold Resources corporate finance manager Victor Matfield told Mineweb that with current economic conditions unlikely to change in the near future, the forecast for gold prices is particularly positive.

"Should inflation accelerate while [interest] rates are locked under economic weakness, gold could spike near past inflation-adjusted highs," Mr Hill remarked.

He added: "We view this as an extremely hospitable macro environment and believe the ongoing investment-driven demand phase will continue for gold, particularly as the broader investor base is not yet fully involved."

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