GOLD PRICE PREDICTED TO RISE LATE IN '88

GOLD PRICE PREDICTED TO RISE LATE IN '88

Gold prices will average around the current level of $430 a troy ounce over the next six months, before moving up to $450 an ounce in the last quarter of the year, Shearson Lehman Brothers Ltd. predicted Tuesday in its annual review of the world gold industry.

Gold will average $450 an ounce over 1988 as a whole, up only slightly

from $447 an ounce in 1987, Shearson said. Prices will be unable to move up significantly from current levels, as strong Far Eastern demand will be offset by stagnant investor interest in the West, it added.However, gold could trade within a range as wide as $420 to $505 an ounce during 1988, assuming a U.S. economic slowdown and stable inflation, the report said.

A recession coupled with deflation would depress the average price for the year to $420 an ounce, while sustained growth and rising inflation would raise the average to $465, it said.

The gold market's advance will be held back by weaker equities, which will be a very important contributory factor to gold's performance and will continue to influence developments over the year, Shearson warned.

At least 50 metric tons of additional gold has come on to the market in the form of gold loans since the October stock market crash, the report said. It noted lower share prices have encouraged gold mining companies to use gold loans rather than fresh equity to raise additional financing.

Shearson warned that gold could fall as low as $380 an ounce as the market remains oversupplied and inflationary expectations are low. However, strong jewelry demand from the Middle East and investment buying from the Far East will push values back up toward $450 in the last quarter of this year, it said.