May cross 26-year high

Gold may exceed a 26-year high this year, driven by increased investor demand and declines in supply, the London-based researcher GFMS said in the 40th annual report on the gold market.

Demand from fabricators, including jewellers, the biggest users, will keep the price from falling below this year's low, $602.46 an ounce in January, according to the report released today. Gold has climbed 4.6 per cent this year, rising to a nine-month high of $688.64 on February 27.

According to the report, price movements would be a key factor in determining jewellery fabrication for the entire year, as a slightly weaker price boosted demand early this year. GFMS, however, forecast gold prices to remain higher throughout 2007.

World jewellery fabrication fell by 428 tonne in 2006 from a year earlier to 2,280 tonne, a 15-year low, which was mainly attributed to highly volatile gold prices throughout the year.

"The chief architect of the dramatic fall in gold fabrication was the development in the gold price, not only in terms of the absolute level but also the degree of price volatility," the report said.

"This was much more a feature of the first six months, rather than the latter half of the last year and largely explains why the first half jewellery demand was 29 per cent lower year-on-year, but the second half outcome effectively unchanged from a year ago."