HSBC ups gold outlook

[] — HSBC Holdings, one of the world’s largest bullion banks, raised its 2011 gold price forecast to $1,450 an ounce in a note dated Tuesday, citing expectations that investors will be attracted to the metal as a haven from risk.

The bank, which had previously forecast a gold price of $1,425 an ounce this year, also lifted its silver price forecast to $26 an ounce for 2011 from $20, and said it expects the white metal to average $20 an ounce next year, up from $17.50.

In 2012 the bank expects gold prices to average $1,300 an ounce, up from $1,275 an ounce previously.

“We believe that gold will continue to attract safe-haven buying from risk-averse investors this year, as European Union sovereign debt concerns persist,” the bank said in a note.

“The Federal Reserve is likely to continue with its program of quantitative easing in 2011 to prevent deflation from taking root, while the pace of economic activity in the developing world will likely remain strong, igniting inflation fears.”

Spot gold was bid at just above $1,380 an ounce in early European trade on Wednesday, while silver was at around $29.50.

The bank added that while it expects mine supply to edge higher this year, production hikes will be limited by declining ore grades, power constraints and a lack of suitable labour. Central banks are also likely to be net buyers of gold, it said.

On silver, HSBC said while prices could correct from their current near 31-year highs and were vulnerable to rising mine supply, they are still likely to benefit from solid safe-haven demand and improving industrial buying.

Recovering economic conditions are also likely to support autocatalyst metal palladium, the bank said, which has approximately doubled in price in both the last two years.

HSBC lifted its 2011 palladium price forecast to $750 an ounce from $675, and its 2012 price view to $700 from $650. Long-term, it sees palladium at $600 an ounce, up from a previous forecast of $525.

“A continued recovery in global automobile production will support both platinum and palladium prices, but should favour palladium,” it said. “This is because growth in world auto production will come from China and other parts of the emerging world, and the US”

In these areas, “palladium-rich gasoline-fired vehicles are preferred to diesel-fired vehicles, which have a heavier platinum weighting”, it said.

The bank left its 2011, 2012 and long-term platinum forecasts unchanged at $1,750, $1,650 and $1,600 an ounce respectively.

Platinum was bid at around $1,730 an ounce early on Wednesday, while palladium was at around $760.