UBS raises its gold price forecast

Investment bank UBS has announced today (September 23rd) that it is pushing up a number of its gold price predictions.

The Swiss company, which is the world's largest manager of private wealth assets, has increased its one-month forecast from $850 per ounce to $925 per ounce.

Anyone investing in gold will be interested to know that it has also upped its three-month forecast to $975 per ounce from its original assessment of $900 per ounce.

The bank has explained that with a strong possibility that the dollar will weaken further in the coming months, it "would not rule out further gains".

UBS metals strategist John Reade said: "The combination of a dollar that appears weakened by the Paulson Plan, safe haven buying that continues due to the conditions necessary for the Paulson Plan, a substantially reduced Comex long position and signs of solid physical demand for gold around the $780-830 level, leaves all the conditions in place for gold to make further gains."

Meanwhile, reports are suggesting that the US could be facing a huge federal deficit of $1 trillion ($1,000 billion) next year to add to the massive trade and current account deficits.

This would also make the prospect of a strong rally in the dollar less likely - indeed, it would be more likely to head the way of the pound on Black Wednesday in 1992 if the debt is downgraded.