Currency concerns, higher inflation will fuel bullion to new records, he says

BMO global commodities strategist Bart Melek is forecasting new record highs for gold in 2011, speculating that U.S. dollar concerns will put bullion prices at $1,300 an ounce next year.
 
Melek said key drivers for precious metals will be investors' concerns over the viability of the euro and fiat currencies, "an eventual move towards a higher inflation environment amid massive western world fiscal imbalances, and improvements in fabrication demand as the world continues to pull out of recession."
 
"Spiraling deficits, ballooning government debts and risk of eventual monetization" are all supportive of gold, Melek asserted. "The expectation that the Fed, the ECB and other central banks will largely be on hold well into 2011 are additional factors that are likely to keep investors buying gold and willing to pay a premium for the insurance properties the metal offers."
 
He suggested that a higher Chinese yuan also represents an upside for gold as the metal benefits from a weaker trade-weighted U.S. dollar over the long term. There may also be competitive devaluations of western world currencies.
 
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