GFMS Survey Puts Gold at $1,800 By Year End

July 10, 2012 – The Thomson Reuters GFMS Gold Survey report released today in Beijing stated gold prices might reach $1,800 per troy ounce in 2012 as improved investment sentiment strengthens the metal in the second half of the year.

The upside in the projection is lower due to expectations of a surplus gold market in 2012 according to Philip Klapwijk, Global Head of Metals Analytics at Thomas Reuters GFMS.

Included in the Gold Survey were concerns over the Eurozone debt crisis that are likely to continue into next year with the focus of concern now being on Spain. Klapwijk also noted that all the factors leading to high prices last year are still present this year. The report places an investment slowdown in the gold market on sluggish growth globally and high price levels that have even affected the consumption of jewelry.

Investor demand is projected to again pick up with sluggish US economic growth and the possibility of a further stimulus package. This would be replicated by the emerging economies of China, India, and Brazil, which would increase the demand greatly.

Unstable equity markets and Eurozone difficulties are likely to bring the safe-haven asset buying back to precious metals and boost prices, the Survey said. Net World Investment had risen by 15 percent to a record of just over $80 billion, a trend that is likely to continue.

A turnaround in central bank buying also affected investors over the past year. With central banks buying gold at record highs in the fourth quarter of 2011, a new trend of buying on the demand of central banks was established.

A great deal of the demand for gold in Asian economies actually takes the form of jewelry because traditionally that is where the wealth in precious metals is stored and transferred. Demand for gold jewelry hit a record high last year as it overtook India’s jewelry demand, which saw a decline of 3 percent. The jewelry demand in China is projected to grow through the year, according to the Survey.

A possible surplus market may cap prices, however. Many mines have expansion projects in the hopper and this may lead to an outgrowth of the market that will negatively impact prices. The modest growth in mining production in the year will keep some check on rising gold prices.

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