Gold forecast rises on France downgrade fears

By Yang Xi
China.org.cn, August 11, 2011

European and American stock markets dropped sharply Wednesday, and gold price climbed to a third record of over $1,800, as rumors swirled that France may lose its top-notch AAA credit rating.

European and American stock markets dropped sharply Wednesday, and gold price climbed to a third record of over US$1,800, as rumors swirled that France may lose its top-notch AAA credit rating.

Investors are concerned about the strength of French banks, which are among the most exposed to troubled Italian debt and other Euro-zone markets.

French banks fell sharply Wednesday, and shares of Societe Generale plunged as much as 15 percent.

France's top credit grade was affirmed by Standard & Poor's, Moody's Investors Service and Fitch Ratings. France's AAA rating is stable, S&P's chief European economist Jean-Michel Six told France Inter radio last week.

Bank of America Merrill Lynch has raised its 12-month gold forecast to US$2,000/oz, citing the increased possibility of a third round of quantitative easing coupled with the deterioration in credit quality in Europe and the United States.

The appetite for gold from retail investors is getting out of hand, said Paul Christopher, international markets strategist at Wells Fargo.