Gold to cross $2,000/oz, says GFMS

The euro zone situation remains in a flux. And, rising commodity prices, besides record debt purchases by central banks, have kept inflation high. As a result, gold is forecast to remain a safe investment bet in 2012.

Gold may reach a record high above $2,000 an ounce in late 2012 or early 2013, but the precious metal is nearing the end of a decade-long run that has lifted prices by more than 600 per cent, metals consultancy GFMS said. It is likely to surpass that level in the final quarter of 2012 or the first three months of next year, GFMS said, potentially breaking through the $2,000 an ounce level.

While unveiling the Gold Survey–Update 2 in Hong Kong, Philip Klapwijk, global head, metals analytics, at GFMS, said, “Gold has performed outstandingly from 2009 to 2011, with a CAGR of over 25 per cent. Having risen 28 per cent in 2011, the metal, however, may struggle in short term to average at $1,640 an ounce in the first half.”

The precious metal in London is currently trading at $1,665/oz (Rs 27,750 per 10g).

“A combination of factors will ensure that sufficient demand from investors and to a lesser extent official sector institutions comes into the market for it to clear at higher levels,” the company said in the second update to its Gold Survey 2011.

GFMS also expects jewellery demand to soften by 3.1 percent in the first six months of 2012 to 1,027 tonnes, in line with a 2.2 per cent decline in overall demand to 2,199 tonnes. Most of this decline will be due to softer demand from India. The gold market is moving into a less auspicious year, GFMS said, and rupee weakness has tended to negate dollar gold’s declines.