FRENCH investment and bullion bank Société Générale thinks that the Gold Price could rise by 500%, urging readers of their latest strategy report to "Buy Gold ahead of QE3".
SocGen's latest recommendation to Buy Gold in fact repeats a call the bank made last November, predicting monetization of a further $600 billion in US government debt by March 2012.
Again examining the historical relationship between the Gold Price and the US money supply in June 2012 – and with no new quantitative easing since before that first report – SocGen now says that "If gold catches up with the increase in the monetary base since 1920 (as it did in the early 80s), its price would rise to $8500 per ounce.
"[Just] to close the gap with the monetary-base increase since July 2007, gold would have to rise to $1900 per ounce," SocGen's strategists add.
According to their research, choosing to Buy Gold is the best way to benefit from sharp increases in the monetary base. There is "full transmission from the monetary base increase to the Gold Price," they say.
Thus they think that the Gold Price – currently at $1585 per ounce – will "challenge $1800 before the end of the year."
Fellow bullion market-maker HSBC's latest note to clients, written by precious metal analyst James Steel on Wednesday, supports this bullish view on the Gold Price. His forecast for the end of 2012 is $1850 per ounce.
"We believe that gold prices will recover in 2012, and we maintain our bullish posture."
However, HSBC's not-so-bullish forecast for 2014 of $1,750 per ounce is considerably lower than the $8,500 per ounce possibility given by Société Générale.
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