Citi expects gold to test $1,000 in 2008

NEW YORK (Reuters) - Gold prices will test a record $1,000 an ounce this year, boosted by growing investment interest, safe-haven demand and strong market fundamentals, a Citigroup metals analyst said.

“We believe gold has entered a new investment-driven phase, in a much more hospitable macro setting. Catalysts are rotating from safe-haven demand, to currencies, to the re-flation trade, as new buyers enter the market,” John Hill, director, metals research, at Citigroup in San Francisco, told clients in a note dated Sunday.

However, Hill also said he believed the broader investor base was not yet involved.

Hill kept his gold forecasts unchanged at $750 for 2008, $800 for 2009 and $820 for 2010.

“Within these ranges, we fully expect a test of $1,000 ounce in 2008,” Hill said.

Hill also raised the price targets for shares of Barrick Gold Corp ABX.N, the world's largest gold producer, to $62 from his previous estimate of $48, and to $67 from $54 for No. 2 Newmont Mining Corp NEM.N.

Gold’s appeal as a safe-haven investment has increased due to worries of further write-downs among major financial institutions and credit market meltdown in the United States, the world’s biggest economy.

In just three weeks, spot gold has jumped nearly $120 to Monday’s peak of $914.00 from a bottom of $795.30 on December 21.

Reporting by Frank Tang; Editing by Walter Bagley