A ‘Grexit’ will send gold to $1,400 by year’s end

Markets/commodities reporter

The gold market isn’t getting much of a safe-haven boost from the turmoil in Greece right now, but that may soon change.
The risk of a Greek exit from the eurozone will help lift gold prices to $1,400 an ounce by the end of the year, according to Capital Economics.
Even so, prices for the metal traded on Comex GCM5, -0.37% fell $9.40, or 0.8%, to settle at $1,193.70 an ounce on Monday.
“The markets still appear to be anticipating some sort of last-minute deal or accounting tricks to rescue Greece,” Julian Jessop, head of commodities research at Capital Economics, wrote in a research note dated Monday. And even if Greece does default on its debt, that wouldn't necessarily lead to an exit from the eurozone, he said.(12:46)

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Still, Jessop said Capital Economics is “confident” that a “further escalation of the crisis in Greece” will provide support to gold.
It would be a mistake to believe that the country is a “‘special case’ and that other members are very unlikely to follow [Greece] out of the door,” he said.
Right now, global risk appetite is still high, as seen in the strength of equity markets world-wide, said Jessop. On Monday, better-than-expected company earnings helped rally U.S. stocks and European equities climbed after China cut its reserve ratio to help boost growth.
But the true test of whether gold has lost its safe-haven appeal “will only come when risk appetite falters again,” Jessop said.