Traders and analysts have been raising their price targets on gold as the precious metal continues its steady climb. Comex June gold futures, the most actively traded gold contract, settled just shy of $1,500 an ounceon Wednesday, though prices stayed above that mark for most of the day.
Analysts at Capital Economics continue to maintain that gold prices will reach $1,600 an ounce by the end of the year and will climb to $2,000 an ounce by the end of 2012. (The firm first made that call in December of last year when prices were under $1400 an ounce.)
They point to three main factors underpinning gold prices: inflation fears, low interest rates, and gold's safe haven status being reinforced by "destabilizing events," such as the euro zone's fiscal crisis, Japan's earthquake, and political unrest in North Africa.
Capital Economics says gold prices will continue to be supported as "slower global growth and lower inflation mean that monetary policy is likely to remain extremely accommodative in the US and in the other major developed economies. What's more, there are plenty of candidates that could cause a fresh bout of risk aversion, including an escalation of the fiscal crisis in the euro-zone."
Don't forget about China. HSBC precious metals analyst Jim Steel says comments from the governor of the People's Bank of China earlier this week about the country's foreign exchange reserves have also been supportive of gold prices.
"Any increase in non-US dollar assets would likely be indirectly supportive of gold, especially if it weakened the U.S. dollar's status as a reserve currency," Steel says. He currently sees gold prices rising to a near-term high of $1,550 an ounce.
But the future may be even brighter than that for the precious metals in the coming months. Traders in the New York gold pits says call options — bets that prices will go higher — have been extremely hot this week.
"There's been significant call buying between the $1800 and $1900 region in August and October contracts," says Mihir Dange, an options trader and co-founder of Arbitrage LLC. "So obviously there's a bullish bet that prices are going to go there within the next six months."