Commodity Blog

Commodity news, technical and fundamental analysis, market data on precious metals, energies, industrial metals, and soft commodities


Gold Prices to Trade $1,100/Oz in Coming Months

April 8, 2009 at 21:10 by Mario

Gold prices could easily trade above $1,000 a troy ounce in the coming months and may even trade above $1,100/oz from investor demand, but the rise won’t be a straight line, U.K.-based GFMS Metals Consulting said Tuesday.
“The price may have pulled back a fair bit from the February highs but that was largely just the market’s reaction to jewelry demand crumbling and scrap booming,” Philip Klapwijk, chairman of GFMS, said at the group’s Gold Survey launch. “It’s far from game over for investors and it will be that crowd which sets the price alight.”
However, Klapwijk warned that a summer lull or the need for inflationary pressures to build could mean sub-$900/oz prices in the short term to between $800/oz and $850/oz. Furthermore, rising scrap supplies are weighing on prices, he said.
The global supply of scrap gold in 2008 rose 27% to a record high of over 1,200 metric tons.
“We expect another record year for scrap sales,” Klapwijk said.
Countering that, net investment last year soared by nearly 76%, with record inflows into gold exchange-traded funds during the year providing significant support to prices, GFMS said.
That investment will grow in 2009 due to ongoing concerns over the global economy and health of the financial system.
GFMS said fiscal and monetary policies currently being enacted, particularly by the U.S. administration, is the root cause of gold’s potential, because of their ability to generate inflationary pressures.
Central banks will also be reluctant to raise interest rates while prospects for economic growth are still uncertain and the dollar could weaken if other countries lose their interest or ability to finance U.S. debt. Both will support gold prices, GFMS said.
In addition to forecasting strong investment demand, the group said central bank gold sales should fall further in 2009 and that should help offset a drop in jewelry use to its lowest level since 1988 last year and increased scrap sales.
However, gold mine output should recover from its 12-year low hit in 2008 and rise by 30 tons in 2009, GFMS forecasts.
“Strength in investment will certainly be needed to overcome weakness in the fundamentals,” Klapwijk said.

One Response to “Gold Prices to Trade $1,100/Oz in Coming Months”

  1. FX Calculator

    You focused to the main part of the subject. Clean and simple. Thanks.


Leave a Reply