Gold to Rise 8% To 15% A Year – Citigroup

Today’s AM fix was USD 1,734.00, EUR 1,354.05, and GBP 1,089.06 per ounce. 
Yesterday’s AM fix was USD 1,723.25, EUR 1,349.66, and GBP 1,083.67 per ounce.

Silver is trading at $33.21/oz, €26.02/oz and £20.94/oz. Platinum is trading at $1,580.10/oz, palladium at $638.90/oz and rhodium at $1,055/oz.

Gold climbed $20.20 or 1.18% in New York yesterday and closed at $1,732.10. Silver surged to a high of $33.205 and finished with a gain of 2.7% while oil surged 2.6%.

Global Commodity Prices & Data – (Bloomberg)

Gold is flat today and appears to be consolidating on yesterday’s gains. Conflict in the Middle East and Moody’s downgrade of France’s AAA rating will support gold. Indeed, the Moody’s downgrade of France shows how the global debt crisis is spreading to Europe’s core with obvious ramifications for the euro.

Oil prices surged yesterday as violence intensified in the Israel-Gaza conflict, sparking fresh concern about supplies from the crude oil rich Middle East should the conflict escalate and engulf other Middle Eastern nations such as Syria and Iran. 

New York’s main contract, West Texas Intermediate (WTI) for delivery in January, soared 2.6% or $2.36 from Friday to settle at $89.28 a barrel.

This is strengthening safe haven demand for gold bullion.

The Greek parliament approved laws yesterday to enforce budget limits and guarantee privatization proceeds will be used to repay debts before the Eurozone Finance Minister’s meet today about Greece in Brussels.

Ultra loose monetary policies continue to support gold. The Bank of Japan is expected to keep its monetary policy unchanged today which should see the yen continue to weaken against gold.

Australia’s Central Bank said it may further cut interest rates but will leave monetary policy unchanged in November.

US Federal Reserve Chairman, Ben Bernanke is speaking at the Economic Club of NY on “The Economic Recovery and Economic Policy” at 1715 GMT.

Cross Currency Table – (Bloomberg)

Citigroup’s Global Head of Commodities Research, Edward L. Morse, spoke to reporters yesterday and said that gold can continue to rise 8-15% per year based on central bank purchases and despite the end of the commodity “super cycle”.

“It is now clear that the commodity super cycle is over,” Morse was reported as saying by Bloomberg. “No longer will a pure long-only strategy bring the returns expected in 2002 to 2008. Nor will conditions approximating those of the last decade return any time soon.”

The “super cycle” of commodity price gains has finished as China’s economy moves to slower growth and supplies increase.

Prices won’t climb “sharply” higher even though quantitative easing from global central banks lift growth and bullion demand rebounds by the end of 2013. Returns will be more “differentiated” among raw materials depending on supply- demand balances wrote analysts at Citigroup Inc.    

The Standard & Poor’s GSCI Spot Index of 24 raw materials, which has increased nearly four times since2001, is up just shy of 1% this year evidenced by sluggish growth in global economies including China, the world’s biggest consumer of cotton, soybeans and copper. 

Citigroup’s Morse was bearish on the outlook for most commodities except for the precious metals of gold, silver, platinum and palladium.