HSBC Securities Raises Gold Forecast on Haven Demand

By Glenys Sim

Aug. 6 (Bloomberg) -- Gold may average $925 an ounce this year on increased demand for haven investments as the global economy faces “formidable structural challenges,” according to HSBC Securities.

The forecast is 5.7 percent higher than an earlier target of $875 an ounce, the bank said in a report yesterday. HSBC raised its 2010 estimate for the metal by 8.6 percent to $950 an ounce and its 2011 target by 14 percent to $825.

“Gold prices will be subject to a myriad of competing forces, including strong investor demand, potentially volatile commodity prices, weak jewelry demand, sluggish mine output, and heavy scrap sales,” New York-based analyst James Steel wrote in the report. “The interplay between these forces will likely keep gold in a wide and volatile trading range.”

Gold for immediate delivery has averaged $919.88 an ounce this year and traded at $963.95 at 10:11 a.m. in Singapore. The metal has re-established its inverse relationship with the dollar, which will be another price driver, according to Steel.

Bullion has advanced 9.3 percent this year as the U.S. Dollar Index, which tracks the value of the greenback against the currencies of six major trading partners, slid 4.6 percent in the same period. Gold tends to move opposite to the dollar as investors seek a store of value and as it becomes cheaper for holders of other currencies.