Stock market report: Tuesday close
Stand by for the biggest gold rush since the Klondike. The price of the precious metal is set to soar as investors becoming increasingly gloomy about the global economy.
Low expectations: Shares will continue to struggle
Gold is often seen as a safe haven in times of economic and political upheaval, and is certain to benefit as investors' options of where to put their money are reduced.
Citigroup forecasts gold will top $2,000 an ounce, the price more than doubling by the summer. It currently trades at about $901, having already come up from $777 since Lehman went bust last September.
Citigroup says: 'We continue to remain unequivocally bullish on the medium- to long-term view on gold, and still believe that we can ultimately see levels in excess of $2,000.'
It adds that this can be achieved in several ways, either with gold continuing to be used as a safe haven or by it starting to trade higher as the massive liquidity injection by governments around the world brings reflation, and with it inflation.
The broker does not believe in the hyper-inflation scenario, but takes the view that generating such levels of liquidity will result in growing inflation.
Gold briefly touched a record $1,030 last March, coinciding with JPMorgan's rescue of bear Stearns.
It has since traded within a narrow range, but Citigroup concludes: 'We feel that if we can see a break through resistance in the $875-$890 area, it could open up the way for a move to new highs by this summer.'
Dealers say companies likely to benefit would be the big gold miners such as Anglo American, down 17p at 1346p, and Randgold Resources, 100p lower at 3075p.
Meanwhile, Rio Tinto remained a weak market, losing 17p at 1639p amid persistent talk the miner may eventually need to tap shareholders to reduce debt levels. BHP Billiton lost 31p at 1219p after Citigroup dropped the shares from its most favoured list, but later closed 14p up at 1264p.
Shares generally came off the boil, giving back some of yesterday's gains as investors focused on the economy and growing job losses.
The FTSE 100 index fell 14.6 to 4194.4. Wall Street traded nervously this afternoon after US consumer confidence dropped to a record low. The Dow rose 8.53 to 8124.56.
Barclays extended yesterday's lead, but only just, with a rise of 1.3p to 90p. The price has slumped from 157p in the past week amid fears the bank will need further funding, and may be nationalised. But Barclays has reassured the City, saying it remains profitable and has no need to raise extra cash.
Royal Bank of Scotland added 1.2p to 15.7p while Lloyds Banking firmed 1.9p to 67.1p.
Wolseley continued to reel from yesterday's profits warning, the shares losing a further 21p to 180p, stretching the two-day deficit to 104.8p. Brokers fear the plumbing-equipment supplier will have to turn to shareholders for extra funds to reduce debt.
Panmure Gordon has cut its target from 280p to 170p.
Kalahari Minerals firmed 1½p to 43¼p after the miner reported that uranium resources at a prospect in Namibia had exceeded expectations.
British Land fell 14p to 431p after Goldman Sachs downgraded from neutral to sell and slashed its target from 613p to 383p.
The broker warned that real estate investment trusts will need to dispose of properties to combat the recession in the commercial property market, and that could lead to a dilution of earnings.
Goldman has raised rival Hammerson, 5p lighter at 393p, from sell to neutral but lowered the target from 591p to 484p. It has cut Brixton, off 2½p at 93¾p, from 153p to 103p, Great Portland Estates, 1¾p softer at 218p, from 244p to 221p, Segro, 2½p easier at 163p, from 276p to 190p and Shaftesbury, 2¾p better at 279¾p, from 316p to 281p.
All three companies continue to be rated neutral.
Derwent, off 9½p at 590½p, remains a sell, with its sights lowered from 607p to 537p, along with Liberty International, 5¼p lighter at 375p, with the target down from 581p to 392p.
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Tomorrow's Agenda
Broadcaster BSkyB posts second-quarter results, with brokers divided on whether it will be good news or bad. Analysts at UBS reckon the traditionally defensive company will have performed well in the current downturn as consumers stay home, glued to the small screen.
They predict 140,000 additional subscribers, with the churn rate - the percentage of customers not renewing their subscriptions - falling to 10.4%.
But Goldman Sachs recently added the satellite broadcaster to its influential conviction sell list, warning that it expects a marked slowdown in subscriber growth. The Christmas period is usually a bumper time for sign-ups.
Standard Life chief executive Sir Sandy Crombie is unlikely to give investors much cause for cheer when the insurer posts fourth-quarter trading numbers.
The group is tipped to report a drop of about 5% in global new life and pensions sales for 2008, with an even worse decline in the UK. Mortgage lending in the UK is forecast to be down almost 70%.
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