LONDON (Dow Jones)--JP Morgan (JPM) has become the latest bank to up its forecast for spot gold prices, hiking its estimates by a whopping 39% and predicting the precious metal to reach at least $2,500 a troy ounce by the end of the year.

This is almost $800/oz higher than current levels, which represent an all-time high.

The U.S. bank had previously expected spot gold to be at $1,800/oz by year-end.

The move will come amid very high volatility, the bank's Colin Fenton said, and is being driven by "rising probability of a reflaring of financial crisis."

Earlier Monday, Goldman Sachs (GS) raised its forecast for gold, saying its economists now place a one-in-three chance of a U.S. recession that would most likely occur within the next six months. But its prices are significantly lower than JP Morgan's, with Goldman predicting a spot prices of $1,645/oz in three months and $1,730/oz by six months.

Gold soared higher overnight and has become an investor favorite amid deteriorating economic conditions in the euro zone and the U.S.
Friday's downgrade of the U.S. credit rating from AAA to AA-plus by ratings agency S&P triggered the most recent strength in gold, which leapt over $70 from Friday's low to peak at $1,715.29/oz earlier Monday.

Morgan Stanley, ANZ, UBS, MF Global and Barclays Capital last week all upgraded their gold price forecasts, while producers like Barrick Gold (ABX), AngloGold Ashanti (AU) and Randgold Resources (GOLD) have been making bullish statement in support of further rises in recent days.

But JP Morgan said it isn't just gold that will benefit from the financial malaise. Commodities geared toward Asia, investment, and inflation will outperform commodities anchored more to the growth prospects and local supply chains of the U.S.

"The bullish basket includes Brent crude oil, gasoil, gold, raw sugar, copper, corn, and wheat," said JP Morgan's Fenton. "The bearish basket includes WTI crude oil, RBOB gasoline, aluminum, zinc, and North American natural gas."

He singled out sugar, noting that dollar weakness and rising inflation expectations open the upside for raw sugar prices to surge far higher than would otherwise be likely, perhaps doubling or more in a spike. But he cautioned that "sugar rallies tend to be brief, violent, and difficult to time."

-By Andrea Hotter, Dow Jones Newswires; +44 (0)20 7842 9413; andrea.hotter@dowjones.com