WSJ articles on #Gold: $2500 gold price!

UPDATE: JP Morgan Joins Goldman Sachs In Upping Gold Forecasts

   By Andrea Hotter 

   Of DOW JONES NEWSWIRES 

LONDON (Dow Jones)--JP Morgan (JPM) has become the latest bank to up its forecast for spot gold prices, hiking its estimates by a whopping 39% and predicting the precious metal to reach at least $2,500 a troy ounce by the end of the year.

This is almost $800/oz higher than current levels, which represent an all-time high.

The U.S. bank had previously expected spot gold to be at $1,800/oz by year-end.

The move will come amid very high volatility, the bank's Colin Fenton said, and is being driven by "rising probability of a reflaring of financial crisis."

Earlier Monday, Goldman Sachs (GS) raised its forecast for gold, saying its economists now place a one-in-three chance of a U.S. recession that would most likely occur within the next six months. But its prices are significantly lower than JP Morgan's, with Goldman predicting a spot prices of $1,645/oz in three months and $1,730/oz by six months.

Gold soared higher overnight and has become an investor favorite amid deteriorating economic conditions in the euro zone and the U.S.

Friday's downgrade of the U.S. credit rating from AAA to AA-plus by ratings agency S&P triggered the most recent strength in gold, which leapt over $70 from Friday's low to peak at $1,715.29/oz earlier Monday.

Morgan Stanley, ANZ, UBS, MF Global and Barclays Capital last week all upgraded their gold price forecasts, while producers like Barrick Gold (ABX), AngloGold Ashanti (AU) and Randgold Resources (GOLD) have been making bullish statement in support of further rises in recent days.

But JP Morgan said it isn't just gold that will benefit from the financial malaise. Commodities geared toward Asia, investment, and inflation will outperform commodities anchored more to the growth prospects and local supply chains of the U.S.

"The bullish basket includes Brent crude oil, gasoil, gold, raw sugar, copper, corn, and wheat," said JP Morgan's Fenton. "The bearish basket includes WTI crude oil, RBOB gasoline, aluminum, zinc, and North American natural gas."

He singled out sugar, noting that dollar weakness and rising inflation expectations open the upside for raw sugar prices to surge far higher than would otherwise be likely, perhaps doubling or more in a spike. But he cautioned that "sugar rallies tend to be brief, violent, and difficult to time."

-By Andrea Hotter, Dow Jones Newswires; +44 (0)20 7842 9413; andrea.hotter@dowjones.com

 

Gold Again Hits Platinum's Level

• By RHIANNON HOYLE And TATYANA SHUMSKY

The price of gold stood at parity with sister metal platinum for the first time since the end of 2008, as the yellow metal's value soared.

Gold set a new record as it hit $1,700 a troy ounce as the U.S.'s downgrade set markets into turmoil. MarketWatch's Laura Mandaro outlines the case for as well as against gold. (Photo: Getty Images.)

"We saw platinum and gold trading at the same price during the early stages of the global economic crisis, and we are close to the same situation" now, said Mitsui precious-metals analyst David Jollie. "Gold's status as a near-monetary asset is giving it considerable strength while platinum's greater exposure to economic growth is currently a weaker driver for price appreciation."

Ratios between the precious metals are watched by investors, who often examine moves to help them decide which metal may be the better investment. Platinum and gold are both used by the jewelry industry; however, platinum's extensive role in automotive applications makes the white metal sensitive to economic downturns unlike gold.

Late afternoon in New York, spot or "cash market" gold traded at $1,719.50 a troy ounce, up $56.10, or 3.4%, and it continued rising in early Asia trading on Tuesday.

Spot platinum fell $2 or 0.1%, to $1,714.

The moves in the spot market were echoed in the futures market. The gold contract for August delivery gained $61.40, or 3.7%, to settle at a nominal record of $1,710.20 on the Comex division of the New York Mercantile Exchange. It was the largest one-day dollar and percentage gain since March 19, 2009. Platinum for October delivery rose $4.50 or 0.3% to settle at $1,723.60 an ounce.

Gold prices are up more than 20% this year as concerns about U.S. economic growth and Europe's sovereign-debt problems keep investors away from riskier assets like equities. Prices got another push Monday as stock prices slid.

"The stock market is…causing a lack of confidence," said Tom Pawlicki, a precious-metals analyst with brokerage MF Global. "There's a fear that there's no leadership in either Washington or the Federal Reserve and no way to bolster the economy."

S&P's move is expected to raise the cost of borrowing for the U.S. Treasury and have wide reverberations throughout the economy as the cost of everything from car loans to credit cards increases. "While this step is not entirely surprising, it is a clear signal to market players that also government bonds do not offer complete security," said analysts at Commerzbank.

The ride higher is unlikely to end soon, as two leading investment banks, J.P. Morgan Chase & Co. and Goldman Sachs Group, raised their gold-price forecasts Monday. J.P. Morgan now sees gold prices at $2,500 a troy ounce by year-end, while Goldman expects gold at $1,730 in six months.

Write to Rhiannon Hoyle at