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Gold 'set for record highs on risk aversion, euro'

London, June 3, 2010

Gold is set for record highs this year amid sovereign risk fears, loose monetary policy and concerns over the outlook for the euro, speakers at a precious metals conference led by ETF Securities said on Thursday.

HSBC analyst James Steel said he expected gold to break through its current record high at $1,248.95 an ounce, set in May, in the third quarter.

'If the issues that are affecting euro zone debt shift across the Atlantic... that is when we would look for the dollar to weaken and for gold to (break higher),' he said.

Steel said accommodative or loose US monetary policy was positive for gold, both because it helped support economic growth and therefore global commodities demand, and as it cut the opportunity cost of holding non-interest bearing gold.

Concern over the outlook for the euro, which has fallen nearly 15 per cent against the dollar this year, is also fuelling a rise in gold investment, particularly in Europe, Nicholas Brooks, head of research at ETF Securities, said.

'It seems across the board to be Europeans who are buying gold, whether it is coins or bars or ETFs,' he said.

'The clear logic is that European investors are worried about the euro.'

'The concern is what happens to the euro in the next three to five to 10 years,' he added.

'A lot of investors (are) looking at gold and commodities generally as an alternative. 'I don't think they are selling all their euros and buying gold, but a lot of conservative investors, very large investors, who before had never held any gold are now looking at gold.'

Strength in the dollar, usually a major drag on gold prices, is unlikely to impact the metal as long as the current crisis of confidence in the financial markets continues, Steel added.

ETF holdings are likely to remain steady, he said, as the ETF buyer tended to buy gold for inheritance purposes, as a portfolio diversifier and as a hedge against inflation.-Reuters




Tags: investment | Commodities | precious metals | gold futures | ETFs |

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