Gold Price "to Hit $1350" in 3rd Quarter

The price of gold is set to reach $1350 an ounce before the end of the 2010, most likely between July and September, according to HSBC's chief metals analyst James Steel.

Speaking today at a press briefing hosted by ETFSecurities in London, Steel said that this year's strong correlation between Gold Prices and the US Dollar – against which gold more typically moves in the opposite direction – is "the longest period [he] can remember.

"It's a sign of elevated risk...a sign we're in the midst of crisis" that gold has been rising in Dollar terms as the Dollar has also risen on the currency markets, Steel explained.

Forecasting a Gold Price range of $1050 to $1350 an ounce in the second-half of 2010, HSBC's precious metals specialist said he expects the metal to reach that upper target during the seasonally strong third quarter.

Steel's further comments on how the "fiscal indiscipline" of Western developed-world economies is supporting Gold Prices were echoed earlier this week by Morgan Stanley economist Joachim Fels.

"Central banks will face an uphill battle to defend their credibility," Fels writes in a new report, quoted by the Financial Times, "and many of them will have their hands tied by financial and fiscal stability concerns.

"Amazingly, though, while the Gold Price and currency markets have been sensitive to these concerns, bond markets appear to be lulled...but this is not new."

According to Fels, bond markets "also took years" to push interest rates higher during the Great Inflation of the 1970s, and then failed to respond quickly to the "big disinflation" of the 1980s and 1990s.

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