Gold prices are expected to rise further as production of the precious yellow metal may fall again this year.
Goldman Sachs has announced an increase in its gold price forecast. It has upped its three-month prediction from $700 an ounce to $1,000 an ounce. Gold price is currently around the $900 a troy ounce mark and some commentators such as US equity manager, Francois Moute, expect it to hit the $1,600 level in the next year.
Goldman Sachs has become the latest to up its forecast in the past two weeks, following similar moves by Morgan Stanley and UBS, which have revised their predictions twice.
An upward pressure on gold prices is anticipated as its production is slated to fall further this year.
The precious metal is currently benefitting from the global turbulence and the fact that investors have reposed their faith in the yellow metal as against other supposedly safe assets. Gold has emerged as the best investment option in times of economic uncertainty like the one confronting the globe currently. Peter Hambro, Chairman of Russian gold producer Peter Hambro Mining, is making no exact price predictions, but expects the price to continue its rise through 2009.
“Over the short-term, gold always responds to what’s going on in today’s market and that is what we are seeing today,” Hambro said. But over the medium-to-long-term, the underlying supply and demand fundamentals have a bigger part to play in determining the price.
Gold production fell last year and may fall further in 2009. This is partly due to the lack of exploration success by the gold mining industry which discovered 15 million ounces last year, compared to production of 80 million ounce.
While the supply of gold looks like it may slow, Hambro foresees little slowing in demand.
“On the demand side, the rising wealth of emerging economies is likely to support jewellery demand, while ongoing financial turmoil and inflationary pressures will continue to stimulate investment demand,” Hambro said.
