Gold prices: Could they hit $2,500 in 2012?
Gold prices will rally again in 2012 to reach $2,000 to $2,500 per ounce because demand is still strong and the precious metal is still seen as a safe haven, according to Sabine Schels, a commodities strategist at Bank of America Merrill Lynch.
Despite the correction in听gold prices听in recent months, Schels said sustained investor demand would result in gold prices averaging $1,850 in 2012, up from $1,573 in 2011.
听鈥淲e see no let up in investor interest.听Exchange traded funds鈥櫶齦evels continue to hold up,鈥� she said.
听Schels said the negative outlook for听sovereign debt, coupled with easy monetary conditions in the euro zone, the US听听and Japan, meant gold would retain its "safe haven" status, while still offering comparatively strong returns.
听Gold will also benefit from a continued need for听central banks in emerging markets to diversify their holdings, she said.
听Schel鈥檚 view differs from some other market participants, who say the sell-off in the precious metal will continue.
听Earlier last week, commodities trader and economist Dennis Gartman told CNBC he expected the precious metal to听fall to $1,500 per ounce or lower, and has sold off his personal gold holdings. Meanwhile, trader Steve Cortes predicted an听even steeper fall-off to $1,000.
听Crude Oil
听Schels was also upbeat about听crude oil, predicting that the benchmark West Texas Intermediate (WTI) will average $101 per barrel in 2012, up from $95.12 this year.
Despite concerns about demand growth due to the anemic global economic picture, Schels said a combination of low oil inventories and further monetary policy loosening will probably听support oil prices听in the second half of 2012.
鈥淲e see very limited OPEC spare capacity. That will allow听Saudi Arabia and the other big producers听to take some barrels off the markets, as in 2008 and 2009,鈥� she said.
鈥淭he break-even price is at around $80 per barrel. That will act as a capital incentive to manage production levels,鈥� she added.
To diversify, Schels recommended听soybeans, which she said have 鈥渦ncorrelated upside鈥�. She said the asset class will benefit from a continued, and steep, drawdown in inventories, which will reverse the fall-off in price seen since September this year.
