Gold to hover around $800 in 2008

Dec 28 | Updated: Dec 29 2007, 06:11am hrs
Gold will rise to a record in 2008, increasing for an unprecedented eighth consecutive year, as investors seek protection from accelerating inflation, metals analysts said.

Gold will probably average $800 an ounce, compared with $696 this year, according to the median estimate of 37 traders, analysts and investors surveyed by Bloomberg News. Gold has gained 30% to $827.20 an ounce in London this year, its best year since 1979, when the Iranian revolution crippled crude- oil exports and US inflation surpassed 13%.

I do see gold hitting a new high at some point in the first half, said UBS AGs John Reade, who is tied as the most- accurate analyst in the London Bullion Market Associations 2007 gold-price forecast.

Gold rose as record oil prices drove up inflation, and supplies from South Africa, the worlds biggest producer, dropped to the lowest in 84 years.

Mounting losses in credit markets tied to subprime mortgage loans spurred demand for alternatives to stocks and bonds, while the dollars drop to a record against a basket of trade-weighted currencies boosted investor interest in commodities.

Prices rose to within 0.5% of the record high on November 7. The metal rose $1.61, or 0.2%, to $827.20 an ounce as of 6:25 am in London. Gold is the second-best-performing metal, after lead, on the UBS Bloomberg Constant Maturity Commodity Index this year. The index of 26 commodities is up 23%.

US consumer prices increased 0.8% in November, the most in more than two years.

Inflation in the 13-nation euro region accelerated to 3.1% in November, the fastest since 2001, according to Eurostat. Japanese consumer prices rose 0.1% in October, the first gain of 2007.

The two stories for 2008 are going to be the subprime credit crisis and inflationary issues, said Ross Norman, director of London-based data provider and a former trader of physical bullion. Gold may climb to pretty well above $1,000 next year, he said. Investment demand for gold may easily rise to 500 tonne, worth about $13 billion, compared with 384 tonne last year, said Philip Klapwijk, chairman of London-based research company GFMS Ltd.