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INTERNATIONAL. Gold prices may hit US$1,500 an ounce in the next 12 to 15 months, Gary Dugan, the Chief Investment Officer (CIO) of Merrill Lynch, said yesterday.

Dugan termed his apprehensions of gold striking such a high as a "fear" that may come true. He reasoned that such a price would mean the other commodities and streams of investments have been shunned by investors.

With confidence in currencies shaken to the core, the yellow metal is increasingly assuming the role of "the most trusted currency", Dugan said. "We have never seen such a rush to buy gold. It's bringing in security and it's still affordable."

Merrill Lynch commodity price forecast authored by Dugan showed that gold prices can rise from the currently prevailing US$913 per ounce to US$1,100 in the first quarter of 2009 and to US$1,150 in the second quarter. "While demand for gold has been rising production has been declining. South Africa, which accounts for the major share of global gold production, is facing political issues and has energy problems," Dugan said.

With reports of declining returns from other investment options, "cash" - keeping money safe in banks and investing in government bonds – is the option in front of investors, Dugan said.

"Fear" and eventual decline of the greenback are the two factors that will drive gold prices, he said. While commodity markets could also bounce back in the first half of the year, a rebound is likely to be short-lived in the absence of strong US consumer demand.

Precious metals, led by gold, could enjoy a more sustained rally with gold benefiting from a weakening of the dollar in the second half of the year, Dugan said.

Dugan said the greenback, which has been strengthening for the past few months, will decline in value by the middle of this year. "That's when people will begin to realise that President Obama's policies are not having the desired impact," he said.

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