Gold May Reach $1,200 as Weak Dollar Ignites Investment Demand

16 October 2009  Bloomberg.com

Gold will rise to $1,200 an ounce by yearend as the dollar extends a slump, increasing demand for the metal as a store of value, according to researcher CPM Group.

“There will be increased economic volatilities, albeit not a major disruption, in the coming five to ten years,” Douglas Horn, a New York-based analyst at CPM, said in an interview at a conference in Singapore. “Investors perceive gold as an asset class to hedge against these volatilities.”

President Barack Obama has increased U.S. marketable debt to a record as he borrows to spur growth in the biggest economy, raising concern that the increasing money supply will debase the dollar and stoke inflation. Gold prices reached an all-time high of $1,070.80 an ounce yesterday as the greenback declined to the lowest since Aug. 2008 against a basket of six major currencies.

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