Gold may extend its best rally since at least 1920 as investors seek a store of wealth amid Europe’s debt crisis and expectations of slowing global growth and rising inflation, according to Reliance Capital Asset Management Ltd.
“The current global macroeconomic environment is very conducive for higher gold prices,” said Sundeep Sikka, Mumbai-based chief executive officer of the money manager, which runs India’s second-biggest gold exchange-traded fund. “The fundamental outlook for gold remains extremely bullish and paints a rosy picture for gold bulls.”
Bullion reached a record $1,921.15 in September as investors sought to diversify away from equities and some currencies amid the European debt crisis and signs of slowing economic growth. The metal may average $1,766 an ounce this year and trade as high as $2,055, according to a London Bullion Market Association survey of traders and analysts.
“The rise in volatility across all assets makes investors jittery about their investments,” Sikka said in e-mailed responses. “We see gold continuing to attract interest even in 2012. Investors are looking for a haven to park their money as the market sentiment for equity is uncertain.”
Bullion rose 10 percent in 2011 for an 11th year of gains, beating the 1.2 percent decline in the Standard & Poor’s GSCI Total Return Index of 24 commodities and the 9.4 percent retreat in the MSCI All-Country World Index of equities. Gold for immediate delivery fell 0.4 percent to $1,611.13 an ounce as of 11:24 a.m. in Mumbai.
Prices may fall in the “near term” as some investors lock in gains, Sikka said. He didn’t give specific price forecasts.