2010 Gold Outlook: Gold May Lose Its Luster in 2010

Gold prices surged higher in 2009 as part of broad commodity rally and USD decline, culminating in a classic parabolic advance in October/November, followed by a 10+% collapse in December. Given ongoing concerns over sovereign and corporate debt burdens globally, we think gold prices are most likely to remain relatively elevated, and we do not expect gold prices to see much below the $850/900/oz. level. By the same token, we anticipate an extremely benign inflation environment in 2010 together with a broadly stable, though relatively weak, USD, which should work to limit gold's upside to the $1200/1250 zone.