GFMS: $1,000-$1,100 gold price is possible
Precious-metals analysts see price surge from non-demand factors
By Tom Stundza -- Purchasing, 4/8/2009 7:58:00 PM
The GFMS Ltd. precious metals consultancy projected April 7 in its Gold Survey 2009 that the precious metal's price could "easily re-attain the $1,000/oz mark and may well push up toward and perhaps even through the $1,100/oz barrier" in the months ahead. The gold price was averaging $908/troy ounce the day the survey was released.
A Bloomberg story based on the report says “gold may reach a record this year” as demand for a hedge against inflation outpaces an expanding scrap supply and weaker use by jewelers and other industrial end users.
The London-based firm suggests, however, that “it may well not be a straight-line rally” caused by industrial demand so that summertime prices at or below $900 are possible. Similar to the issues raised a month ago by equally price-bullish CPM Group, GFMS says rising economic uncertainties related to recessionary conditions and rising joblessness, increasingly volatile and vulnerable financial markets and weakening economic conditions will continue to spur strong investment demand for gold this year.
In the GFMS report, the executive chairman, Philip Klapwijk, suggests that fiscal and monetary policies currently being enacted by the U.S. and other industrialized nations are “the root cause” of gold’s price-increase potential--along with stronger interest from investors and speculators seeking a safe haven against inflationary pressures caused by financing the explosion in U.S. government debt.
Reviewing gold demand last year, the GFMS report says total fabrication fell by 7% to 2,850 metric tons, its lowest level since 1988. The bulk of the loss was attributable to the demand slowdown from the jewelry and electronics sectors--a result mostly of the economic downturn leading to depressed orders and supply chain de-stocking. Overall, 2008 saw wide fluctuations in investment activity although there was gold bar hoarding in East Asia and the Middle East.
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