Gold to Continue Rise, $1600 in 2012

Gold may advance on concern that European banks may struggle to raise funds, increasing the appeal of the metal as a means to protect wealth.

Association of German Banks said that the nation’s 10 largest lenders, including Deutsche Bank AG, may need about 105 billion euros ($134 billion) in fresh capital because of new regulations.

The Wall Street Journal also reported that Europe’s recent “stress tests” on the strength of major banks understated some lenders’ holdings of potentially risky government debt.

“Worries over fundraising by Europe’s banks and governments are likely to persist,” said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan’s largest currency broker.

Bullion is set for a 10th annual gain as investors seek a store of value against financial turmoil in Europe and the prospect of slowing economic growth. Gold reached a record in June amid investor concern that sovereign-debt levels in some European states were too high, and that there was increased risk of default if governments were unable to issue new debt.

UniCredit SpA’s Jochen Hitzfeld, the most accurate gold forecaster tracked by Bloomberg in the last three quarters, yesterday raised his estimate for the average price next year by 12 percent to $1,400 an ounce, citing Chinese demand. In 2012, bullion will average $1,600 an ounce, Munich-based Hitzfeld said in a report.

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