Gold, headed for a 10th annual gain, may reach at least $1,300 an ounce

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this year, as investors seek a shield against financial turmoil, weak currencies and inflation, according to Gold Fields Mineral Services (GFMS).

“There is going to be in all likelihood a surge in investment demand toward the end of this year, driving prices toward the $1,300 level and possibly beyond,” CEO Paul Walker said in an interview, repeating a June forecast. “Prices are going to ratchet up.”

Bullion demand increased 36% in the second quarter as investors boosted purchases of gold-backed funds and pushed up prices to a record during Europe’s sovereign-debt crisis, the World Gold Council said on August 25. Investors bought 291.3 metric tonne of the metal in exchange-traded funds, or ETFs, the second- highest quarter on record, the producer-funded group said.

“There is a wide enough group of people who are going to continue buying gold for a variety of reasons and that’s going to be the key driver of price action,” Walker said from Goa, where he is due to speak at a conference on Friday . “The physical market, the jewellery market, will be playing a somewhat minor supportive role in price determination going forward.”

Goldman Sachs Group forecast earlier this month that prices may reach $1,300 in six months and Deutsche Bank AG said on June 3 that the metal may surge to $1,700 as currencies slump. The euro fell to a four-year low versus the dollar in June. Immediatedelivery bullion traded in London was little changed at $1,237 an ounce.

US RECESSION

Prices have rallied 13% this year in New York and reached a record $1,266.50 on June 21 as investors sought to protect their wealth against financial woes in Europe and the prospect of slowing economic growth. Nouriel Roubini, the New York University economist who predicted the global financial crisis, on Thursday said US expansion will be “well below” 1% in the third quarter and put the odds of a renewed recession at 40%.

Assets in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, were unchanged at 1,297.95 tonne as of August 26, figures on the company’s website showed. Holdings reached a record of 1,320.44 tonne in June.

In India, the biggest gold user, demand almost doubled in the first-half on increased jewellery purchases and investments , the council said on August 25.

Imports by the country this year may equal 2009’s level as early as this month because of “robust” demand, the group forecast. Purchases in the first half were 348 tonne, compared with 559 tonne in 2009, according to council’s data.

‘REMARKABLE THEME’

“This year we are seeing an underlying and somewhat remarkable theme in the Indian market; a willingness to continue to buy at high prices and a belief that the price will continue to go up,” Walker said. “You would have to have a pretty catastrophic final quarter of the year for imports not to match the 2009 level.”

Gold futures in India climbed to a record 19,198 ($410) per 10 grams on June 8. Local prices have advanced 13% this year. The price of silver may reach $20 an ounce as industrial demand rebounds, Walker said. The metal for immediate delivery was at $18.97 an ounce and has added 12% this year.