Gold outlook rosy as market jitters persist-LBMA head

A worker displays gold ingots at a manufacture unit of PT Logam Mulia, the precious metal unit of state-owned miner PT Aneka Tambang Tbk, in Jakarta September 10, 2009.

EDINBURGH (Reuters) - The environment for gold prices is set to stay positive as concerns over the stability of other markets fuel investment into hard assets, Kevin Crisp, chairman of the London Bullion Market Association, told Reuters.

Speaking on the sidelines of the LBMA's annual conference, Crisp said the current environment was "still very positive for the dollar gold price," though he declined to give a forecast.

"There are still very few people willing to come in and sell gold in any sizeable way," he said. "There are some sellers out there, but whatever they sell seems to be absorbed very readily by the market. To me, it is hard to see a real sustained slide in the gold price."

Spot gold rallied nearly 13 percent from the beginning of September to a record high of $1,070.40 an ounce on October 14. At 3:25 p.m. on Monday it was bid at $1,061.20 an ounce.

Gold prices, which climbed sharply in early 2009 as fears rose over the stability of the wider financial markets, are still benefiting from concern over the economic outlook, Crisp said.

"Personally speaking, I still feel the global business outlook is still a little cloudy," he said. "That means that many people are wanting that insurance policy."

He said the size of the gold market, compared to the equity or currency markets, meant even small changes in investor attitudes towards precious metals significant for prices.

"It doesn't have to be a case of everybody getting into gold," he said. "It is a lot more mainstream than it used to be, but it doesn't take massive amounts of money coming into this market to really keep things looking positive."

FUNDAMENTALS TAKE BACK SEAT

Some analysts have pointed to a lack of physical demand for jewellery -- typically the main source of gold demand -- at high prices and a plateauing of demand for exchange-traded funds as potential risk factors for prices.

In terms of supply and demand, miners were continuing to face production issues, while the high levels of scrap gold that flooded the market in early 2009 appeared to have receded, Crisp said.

Nonetheless, "this market is not at this point in time driven by fundamental factors," he said.

"People are looking to insulate their wealth... there are some people with substantial amounts of money who are looking at ways to diversify into hard assets."

Crisp, who is also manager of Mitsubishi Corp's precious metals division, was appointed to the LBMA chair in June. He said his priority for the association in the next year was bringing together the disparate strands of the market.

(Reporting by Jan Harvey; Editing by Keiron Henderson)