Gold closed in on $1900 per ounce this morning in early trading as investors eyes turned from Europe to Libya. Rebel forces there advanced on the capital overnight and are now threatening a final showdown in which many expect the overthrow of the defunct government. Though the change would be a welcome one, the wartime rebel government has yet to lay forth a clear vision for a post war Libya. Without any history of functional democracy, a transition away from Gadaffi’s rule is bound to be difficult. Continued crisis in Libya could contribute to the instability of the already fragile region, concerns about which are adding risk premium to the gold price this morning.

Though there were no new developments on the European debt front over the weekend, traders are still extremely wary of the worsening situation there. The combination of the Libyan situation and the undercurrent of uncertainty about Europe has been enough to drive gold up over $30 per ounce from Friday’s close.

In a note this morning, Barclays Capital has announced a new outlook on gold for 2012, stating that “In our view, the continuation of central-bank net buying coupled with the return of investment demand following the heightening of economic and financial market uncertainty is set to drive prices to yet new highs.” In conclusion, they went on to predict that gold prices would “average $2,000/oz in 2012.”

Barclays, known for their conservative price estimates, is following in the footsteps of several other major banks and financial institutions that have raised gold forecasts in the last several months. JP Morgan Chase recently raised their 2011 forecast to $2500 per ounce before the end of the year. Goldman Sachs also raised their forecasts earlier this summer, but they have already been proven to be too conservative.

As gold prices this year have surged the most in over 20 years, it’s no wonder financial institutions are being forced to raise their price predictions. Even so, Wall Street has been somewhat slow to catch onto the bull market in gold. The vast majority of gold price predictions released by major financial institutions have proven too low over the last five years. If the pattern continues, it’s reasonable to assume that these predictions could follow in suit. With gold already knocking at the door of $1900 per ounce, it surely won’t be long until these forecasts are raised yet again.