GFMS sees gold price above $1,800/oz in H2 2012
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The gold market is expected to remain choppy in the very short term, although the price should be well supported in the mid-$1,500s per ounce, says Philip Klapwijk, global head of metals analytics at Thomson Reuters GFMS.
However, the consultancy forecasts that the gold price will comfortably exceed the $1,800 mark in the second half of 2012 as investment demand grows.
“We would not be surprised if heightened volatility were to continue, in part as investors’ interpretation of the impact of macroeconomic news on gold seems to be increasingly variable. Despite this noise, and the stagnation in the price that we have seen over much of the year to date, we believe the gold bull market remains intact,” he said at the launch of the Chinese Edition of Gold Survey 2012 in Beijing on Tuesday.
“Indeed, as we move into the fourth quarter, a clearer uptrend should establish itself, with gold easily breaching the $1,800 mark before year-end. A new high for the price does, however, seem to have been postponed until the first half of 2013,” he said.
Thomson Reuters GFMS on Tuesday launched the 16th Chinese language version of its annual Gold Survey at an event in Beijing co-hosted by China National Gold Group Corporation, the World Gold Council and the CME Group, supported by the Beijing Gold Economy Develop Research Centre, Shanghai Gold Exchange and the Shanghai Futures Exchange.
Klapwijk said the consultancy expected a modest increase in mine production and higher scrap supply, resulting in a new record high for overall supply in 2012.
On the demand side, fabrication demand, which is dominated by jewellery, is forecast to fall by a small amount this year, due to still high and volatile gold prices coupled with weak consumer spending due to a marked slowdown in the global economy.
As a result, the market “surplus” - defined as the difference between supply from mine production and scrap less fabrication excluding all coins - is set to grow further in 2012, as investors and the official sector once again will be called upon to acquire the surplus metal.
Fortunately for the price, external economic and financial conditions in the coming months are expected to stimulate another notable rise in investment inflows into the gold market.
One of the key factors behind this renewed investor interest is an increasing likelihood of further monetary easing worldwide. In particular, as the US economy has continued to show growing signs of faltering, the consultancy believes there is a fair chance the US Federal Reserve will launch a new round of asset purchases later this year.
This, coupled with the persistence of ultra-low interest rates, will not only raise longer-run inflationary fears but also limit the scope for any further appreciation of the US dollar, both of which should favour gold investment.
Furthermore, the consultancy expects that European sovereign debt concerns will remain at the fore, which will continue to fuel safe-haven interest in the yellow metal.