Gold to pause ahead of jump

AFTER a stellar year in 2011, Thomson Reuters GFMS is predicting a more subdued start to 2012 for gold ahead of a fresh surge to all-time highs.
Gold to pause ahead of jump Gold to pause ahead of jump Gold to pause ahead of jump Gold to pause ahead of jump Gold to pause ahead of jump

In its latest gold survey, the commodity consultancy said after a 28% jump last year to a spot market peak of $US1921 per ounce, gold prices might struggle in the short term.

GFMS has forecast an average gold price of $1640/oz for the first half of the year.

Comex gold closed 1.3% up overnight to $1652.50/oz, while spot gold last traded at $1651 at 10am AEDT this morning.

"We are conscious that the eurozone crisis is far from over and its impact on liquidity, the value of the US dollar and attitudes to risk could all become very apparent, particularly once buying linked to the Chinese new year is behind us," GFMS global head of metal analytics Philip Klapwijk said.

However, extremely low interest rates, enhanced inflation expectations, monetary policy easing and a general mistrust of reserve currencies could push gold to fresh all-time highs in the second half of the year.

"We could even see prices just over the $2000 mark later this year or in early 2013," Klapwijk said.

"We've seen a great deal of attention on the eurozone debt crisis, which has led some to seek out the dollar and US treasuries as a least bad option.

"However, the re-emergence of US concerns, in particular any apparent need to adopt QE3 [round 3 of quantitative easing], could really fire up the gold market.

"After all, don't forget that gold's price spike last August/September followed on from the US debt ceiling impasse and downgrade."

However, the long-term fundamentals for gold may not be as positive, with the precious metal approaching the end of its decade-long bull run.

GFMS is tipping a fall in gold prices as the global economy stabilises.

Earlier this month, JPMorgan forecast gold to peak at an average price of $1925/oz in the current quarter but to remain in the $1800-1900/oz range for the rest of 2012.

The investment bank expects speculative investors to sell down their holdings but central banks and long-term investors to continue to grow their inventories.

Meanwhile, GFMS said mine production grew by 4% last year but world investment in tonnage fell 7%.

The record price of gold saw investment value jump by more than 20% to a record $80 billion.

Central bank purchasing jumped to 430 tonnes for the year, with more countries diversifying their holdings away from reserve currencies.

Gold bar purchases jumped by over a third to 1200t, while exchange-traded fund holdings rose 7%.

Jewellery demand fell 2%, dropping in most countries but remaining strong in China and India.

Comex trading fell by more than 90,000 contracts last year.

Despite higher prices, global scrap fell by 2%, which meant jewellery fabrication net of scrap actually rose by 2%.

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