April 13, 2006
By Atul Prakash
Business Journal
London - Gold had tremendous scope to attract more investment, which could push prices past a 1980 peak of $850 (R5 200) an ounce in the next couple of years, due to economic and geopolitical uncertainty, consultancy GFMS said yesterday.
"This is not a rally being driven by fundamentals. In essence, it's being driven by the weight of money that's coming into the market," said GFMS chairman Philip Klapwijk. "I think that flow will not cease or reverse. It'll probably increase."
High energy prices fuelling inflationary expectations, the possibility of a severe economic slowdown next year, tension in the Middle East and global terrorism would remain positive factors for gold, GFMS said in its Gold Survey 2006.
"Levels safely more than $600 are now in our sights and further hefty gains over the next year or two are quite possible. In the right circumstances, the 1980 high of $850 could even be taken out," Klapwijk said.
Gold shot to $604 an ounce on Tuesday before retreating. It has gained more than 40 percent in the past year.
The metal was benefiting from a rise in investor interest in commodities as an alternative asset to stocks, bonds and cash. There was scope for further inflows from longer-term investors such as pension funds, the report said.
GFMS said jewellery fabrication demand rose about 4 percent from the previous year to 2 712 tons in 2005 despite higher prices. But almost the entire gain came in the first half, and the last quarter saw a sharp drop.
The weakness has continued in 2006 because of high prices and increased volatility.
Global mine output rose 2 percent to 2 519 tons in 2005 due to higher production at two leading mines and the start of operations at some new units. The largest annual drop occurred in South Africa and Canada.
Output was expected to rise further this year as some units were likely to ramp up to full capacity and new mines would start, the report said.
The report said net gold sales by central banks surged 40 percent to a record 656 tons in 2005. About 41 percent was offloaded in the first quarter.
"Overall, the apparent anti-gold sentiment within the official sector that had grown during the 1990s seemed to be moderating, if not fading away."
The sales figure dropped sharply in the first quarter of this year and net sales during the rest of the year were likely to be lower than last year, the survey added. - Reuters
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