GFMS believes gold to rise above US$1,600

Metals research consultancy GFMS has forecast gold to break through the US$1,600/oz barrier before the end of this year.
Philip Klapwijk, GFMS chairman, believes the prospects for gold prices remains bright after a record-breaking 2010 due to several factors.

He said: “investors continue to be concerned about the outlook for inflation, with governments showing little appetite to tighten monetary policy significantly. And, with the spotlight also shining on the state of government finances, there is every reason to believe that investors will remain focused on the gold market."

Mr Klapwijk added "Furthermore, growing price acceptance by consumers will help lift jewellery demand, while generating only a muted response from scrap. Overall, we would not be surprised to see gold break through US$1,600 before the end of the year.”

GFMS, which launched its Gold Survey 2011 on April 13, said gold prices rose by 26% in 2010 as investment demand continued to drive the higher.

Mr Klapwijk said: “Global investment actually fell compared with 2009, but last year’s performance was still comfortably the second highest on record. Furthermore, in value terms, world investment last year did set a new high.”

Support for high prices was not restricted to developments in the investment sector, with demand for jewellery partially recovering, GFMS said.

The consultancy attributed much of this lift to demand in China and India, which have benefitted (respectively) from positive price expectations and a robust economic backdrop.

In contrast, the US, European Union and the Middle East were “notable casualties” in this trend, with each seeing scrap supply exceed jewellery consumption, GFMS added.