National Bank Financial is predicting the return of gold as a safe haven investment, and, as a result, it suggests the price on the commodity will rise to US$1,5000 per ounce.

NBF notes that last August, three days after it raised the odds of a U.S. recession to 50%, it also raised its’ target price for gold to $US900 an ounce (from US$650).

“Today, with bullion having broken through its previous record nominal price of $878 (January 21, 1980), it’s time to revisit our outlook and reiterate our view that gold is poised for a comeback as an investment haven,” it says. As a result, it now expects that within 12 to 18 months it will be trading at $1,500 an ounce.

Gold futures closed with gains after surging to a record $929.80 an ounce Monday, as a weaker dollar and expectations of another Federal Reserve rate cut boosted demand for the precious metal.

Gold for February delivery closed up $16.40, or 1.8%, at $927.10 an ounce, on the New York Mercantile Exchange.

NBF points to five sources of upside pressure to gold prices: financial instability and massive bank writedowns; massive injections of liquidity and a return to negative real interest rates; the decline in the value and role of the U.S. dollar; the swelling U.S. budget deficit and inflation expectations; and, increased financial demand for gold as a distinct asset class.

“We think gold has attractive potential for appreciation and, especially, as a tool for medium-term portfolio diversification via gold stocks or gold ETFs. The current price of crude oil, around US$90 a barrel, is about the same in constant dollars as the late-1970s high. Our new gold target of US$1,500 an ounce is still far from the early-1980s high of US$2,200 in constant dollars,” it concludes.