Gold might rise to $740 an ounce (oz) by the end of the year as turmoil in the credit markets spurred demand for the precious metal as an alternative to stocks and bonds, said London-based researcher GFMS. | |
| The yellow metal, which has breached the $700 mark, was likely to end the year on a high note and average at $690 an ounce, said GFMS, a global precious metals consultancy firm, in a seminar in London today. |
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| "I think it could go to $740'' this year, GFMS Executive Chairman Philip Klapwijk said in an interview, maintaining his April forecast. "There's a 50-50 chance of $850 next year,'' he added. |
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| "We may not be completely out of the woods as regards speculator sell-offs to raise cash or reduce leverage in our new world of subprime jitters, but the norm of safe-haven buying should dominate investor activity from now on," said Klapwijk. |
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| Gold for immediate delivery fell $3.51, or 0.5 per cent, to $708.09 an ounce as of 10:39 am in London today. Gold has climbed 5.3 per cent this month, after gaining 2 per cent in the first six months of the year. |
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| The buying interest is expected to be chiefly driven by traditional factors such as an anticipated fall in the value of the US dollar, lower economic growth and a need for safe-haven investments. |
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| Although short-term liquidation was likely to continue, there was scant evidence of any longer-term investors losing confidence and instituting strategic shorts, a factor which they feel is crucial to the solidity of values moving forward, noted Klapwijk. |
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| The demand for gold fabrication is also forecast to rise in the second half of the year. However, it is not expected to support any rally actively due to its price-sensitive nature, though it would provide good support to prices. |
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| A buoyant jewellery offtake in the first half is estimated to compensate for the investor sell-off in the second half, boosting consumer confidence in the yellow metal as an alternative investment avenue. |
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| In the second half of the current year, the consultancy firm estimates a marginal fall in production. However, overall production is forecast to remain high. Mine production in the first half grew by 3 per cent to 1,201 tonnes. |
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| The largest increase came from Asia, with the Indonesian output growing by over 80 per cent and the Chinese production gaining by nearly 20 tonnes. In contrast, Peru's output fell by 24 tonnes, while the South African figures were 7 per cent lower. |
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| Net official sector sales in the first six months of 2007 grew by a modest 4 per cent year-on-year. The gain was lower because a higher sales by the signatories to the Central Bank Gold Agreement (CBGA) were largely offset by a slump in net sales outside the group. The second-half sales are forecast to more than double year-on-year to around 280 tonnes, largely buoyed by higher CBGA sales. |
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| Scrap supply, meanwhile, fell by 28 per cent year-on-year in the first half to just over 450 tonnes. The largest fall was recorded in West Asia, largely as a result of comparative price stability. The decline for India in scrap sales was relatively modest at 17 per cent. |
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