Gold prices to peak in 2013: GFMS survey

The year ahead promises to be very good once again for the gold market, according to Thomson Reuters’ GFMS Gold Survey 2012, presented Wednesday in Toronto.

The updated survey results forecast that gold prices will continue to increase, and predicts “gold to average an all-time high over the first half of 2013…. of well into the $1,800s (per ounce).”

Additionally, gold production will have a “stronger tone” this year, with gains of 1.25% expected, or 35 tonnes more produced in 2013 than in 2012, Phillip Klapwijik, Global Head of Metals Analytics at Thomson Reuters GMFS, told an audience of more than 100 gathered in Toronto for the release of the survey’s findings.

Because of this, Klapwijik noted, “the environment for gold investment remains very positive into 2013.” Supporting this is the fact that last year, the US dollar gold price saw a 6.2% rise, while the Euro gold price rose by almost 15%. “So, European investors who bought and held, can definitely feel satisfied,” he added.

Other key findings of the survey include:

  • Gold investment swelled to record levels in dollar terms in 2012, at an approximate $87 billion;
  • Official sector purchases reached 50-year highs;
  • Jewelry demand remained resilient, falling only 4%; and,
  • Mine production growth was constrained, but remained at record levels.

Klapwijik added that despite the gold sell off in the fourth quarter of last year, many of the factors that have underpinned gold’s bull run to-date remain in place and will return to the fore this year.  Klapwijk noted “Although there is now growing speculation around the structure and longevity of the Fed’s QE programme, policies of ultra-low interest rates across the western economies will persist in 2013.  This will continue to support investor interest in gold in the absence of low risk investments that can offer acceptable yields”.

Regarding the 4% fall in demand for jewelry in 2012, this was mainly a function of losses in India, which accounted for 85% of last year’s (gross) decline.  Klapwijik told the audience, however, that 2013 may be a vastly different year for India, as many days in its 2013 calendar are believed to be very “auspicious” and as such, many weddings are expected in the year ahead, leading to higher demand for gold jewelry.

Also of note was a drop in Chinese jewelry fabrication (the first in nine years), chiefly as a lack of a clear price trend reduced investment-related purchases.  At the same time, global scrap fell by 2 %, despite a 6%t price rise.  This was in turn attributed chiefly to price acclimatization, near market stock depletion and expectations of higher prices to come, Klapwijik said.