(Bloomberg News) The most accurate forecasters say gold will rebound from its biggest monthly plunge since 2008 and reach a record by March because economic growth is stagnating and Europe's debt crisis is unresolved.
Futures traded in New York may rise 13 percent to $1,950 an ounce by the end of the first quarter, according to the median of estimates compiled by Bloomberg. The predictions are from eight of the top 10 analysts tracked by Bloomberg over the past eight quarters. Two declined to give forecasts.
Holdings in exchange-traded products backed by bullion rose the most in three months in October, and the most-widely held option gives owners the right to buy gold at $2,000 by Nov. 22. Demand for the metal accelerated since May as slowing growth and mounting concern that European leaders will fail to contain the region's debt crisis caused $7.5 trillion to be erased from the value of global equities.
"There is a loss of trust in the entire financial system and urgent need for safe-haven investment," said Ronald Stoeferle at Erste Group Bank AG in Vienna, the second most- accurate forecaster in the past three months. "The environment for gold is just perfect."
ETP holdings expanded 1 percent to 2,271.2 metric tons last month, a pile now valued at $126.6 billion and greater than the reserves of all but four central banks, data compiled by Bloomberg show. Bullion bought for investment accounted for 38 percent of total demand in 2010, compared with about 4 percent a decade earlier, the London-based World Gold Council estimates.
Paulson & Co., founded by John Paulson, remains the largest shareholder in the SPDR Gold Trust, the biggest ETP backed by physical metal, according to an Aug. 15 filing with the U.S. Securities and Exchange Commission. Paulson, who made $15 billion betting against subprime mortgages, bought the 31.5 million shares in the first three months of 2009. Their value increased to $5.3 billion from $2.84 billion since then.
Gold has risen 22 percent this year, beating the 1.8 percent advance in the Standard & Poor's GSCI gauge of 24 commodities, the 8.3 percent decline in the MSCI All-Country World Index of equities and the 8.8 percent return on Treasuries calculated by Bank of America Corp. indexes. The metal has appreciated more than sixfold in its 11-year run of annual gains.
Prices climbed 6.3 percent in October, rebounding from the bear market in September after dropping more than 20 percent from the record $1,923.70 reached Sept. 6. Gold futures for December delivery rose 1 percent today to settle at $1,729.60 in New York.
Hedge funds and other speculators increased their bets on higher prices by 8.7 percent to 138,846 futures and options in the week ended Oct. 25, Commodity Futures Trading Commission data show. It was the biggest gain in almost three months.
The rally may fade because the swings in prices undermined the perception of gold as a haven, said Dean Junkans, an analyst at Wells Fargo & Co. in Minneapolis. In an Aug. 16 report, three weeks before the plunge began, he characterized the market as a "bubble that is poised to burst."