Reuters:

Diversification by central banks and sovereign wealth funds into gold could outpace private investments to become a main driver of the metal, said Jon Spall, director of commodities hedge fund sales for Barclays Plc's Barclays Capital.

Fund managers from the official sector and institutions will keep piling into the metal as a long-term investment due to a gloomy dollar outlook and inflation worries, as the metal is only in an early stage of its bull cycle, Spall told Reuters in a recent interview.

"I think the hedge funds are important to the move, but whether the move is sustainable has much more to do with asset allocation from sovereign wealth funds, central banks, pension funds and other large managers,"

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Spall said that investors, public or private, do not feel that the gold market is particularly long at current prices.

"We are in the early stages of the move higher in gold rather than the later stages, and that's true whether you talk to hedge funds, sovereign wealth funds," he said.

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Spall said that the gold market could eventually see daily parabolic rallies of up to $200 to $300 an ounce, at a time when every investor is diversifying into bullion.

However, he said that the metal is now a long way from that frenzied state, as gold's current rise has still been relatively slow and measured.

My comment: Gold is severely overbought currently and I am amazed it has not corrected. I actually have a large sum of cash I want to put to work in the gold shares and I have been waiting for a pullback for a month. At some point we will have a correction as nothing goes straight up and believe me it is not different this time. Having said that the price gold long term is going higher, way higher as the US and other western governments continue to follow policies that will lead to their paper currencies demise.

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