Gold 'to hit $2,000' on Spain fears

A looming flare-up in the eurozone crisis over Spain will drive the price of gold towards $2,000 (£1,255) an ounce this year, a leading consultancy predicts.

Rising fears about the region’s fourth largest economy will send a fresh flood of investment towards the “safe haven” metal, according to the annual report from Thomson Reuters GFMS.

Philip Klapwijk, global head of metals analytics at the consultancy, said: “We could easily see last September’s record high [a closing high of $1,900.23 on September 5] being taken out.

“A push on towards $2,000 is definitely on the cards before the year is out, although a clear breach of that mark is arguably a more likely event for the first half of next year.”

Demand for gold often sees a boost when fears about the situation in Europe intensify. The metal can likewise benefit from the prospect of more quantitative easing (QE), as investors seek to protect their wealth from the inflationary effects of central bankers’ actions.

In the shorter term, GFMS thinks the apparent abatement of the eurozone crisis and reduced expectations for a third round of quantitative easing or “QE3” in the US could drive the gold price lower, perhaps below $1,550 in the next couple of months. more