By Terry Hughes

The potential of inflationary pressures in the US, the expectation of a weaker US dollar and increased geopolitical risks, leads Merrill Lynch analyst Andrew Richards to raise the bank's average gold price forecasts by US$125/oz to US$650/oz for 2006, 2007 by US$175/oz to US$675/oz and 2008-2010 to US$600/oz, US$550/oz and US$550/oz respectively.

However, in the short term, the analyst "would not be surprised" to see gold drop to US$600-625/oz over the coming month or so.

After that, over the late northern hemisphere summer and early autumn, the analyst expects a pick up, with a yearend target of US$750/oz.

At the same time Merrill Lynch has also lifted its copper price forecasts by as well as minor changes to aluminium price, oil and nickel price assumption increases.

This has led to major earnings revisions for Oceana (OGD), Lihir (LHG), Perseverance (PSV), Sino Gold (SGX), Kingsgate (KCN), Newcrest (NCM) and Oxiana (OXR).

The broker's top picks are Lihir with a target of $3.50, Sino Gold with a target of $6.00, Bolnisi Gold (BSG), with a target of $2.75, and Perseverance (PSV) with a target of 53c. All four stocks are rated Buys by Merrills.

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