Thomson Reuters GFMS Gold Survey report released in Beijing today stated that gold prices may touch $1,800 an ounce in 2012 on improved investment sentiment for the gold market in the second half of the year.
However, the upside would be capped by expectations of a surplus gold market in 2012, the release quoted Philip Klapwijk, Global Head of Metals Analytics at Thomson Reuters GFMS as saying.
The Gold Survey noted that concerns over the Eurozone debt crisis is likely to continue in 2012 too, with Spain emerging as the principle area of concern. “All the factors that triggered high gold prices in 2011 are still present in 2012,” Klapwijk noted. Investors' sentiment for gold is currently low due to the global slowdown and high international price levels. Demand for jewelery has also declined as consumers are cost-wary.
However, investor demand is likely to pick up as the faltering US economy, denoted by a slew of weak economic data, may soon trigger a stimulus package to contain the slowdown. The move is also expected to be replicated by emerging economies like China, India and Brazil, thus taking demand higher.
This, coupled with staggering equity markets and Eurozone concerns is likely to elicit safe haven demand for the precious metal and boost prices, the Survey noted. Net World Investment had risen by a healthy 15% to a record level of just over $80 billion, which is likely to continue in the year.
A turnaround in Central Bank activity had also inspired investors in 2011. Official sector purchases had shot up to just over 450 tonnes. Central Bank buying is also likely to be realised in the later part of the year, which will push prices higher.
In the jewelery segment, demand in China hit a record high last year overtaking India's jewelery demand which actually declined by 3%. China's jewellery demand will continue to grow in 2012, erasing losses by faltering demand elsewhere.
However, a surplus market is likely to cap the rise in prices, the report said. Several mines have expansion projects in the loop to take advantage of the decade of bullish gold prices. In 2012, the consultancy expects modest growth in mining production which will keep a tab on rising gold prices.
The Gold survey notes that despite restricting factors, gold's bull run will continue and prices may hit an upside of $1,800 an ounce by the end of 2012. However, a new high for gold prices, the kind seen in September, may be pushed to the first quarter of 2013, Klapwijk said.