Gold is nearing the final stages of its decade-long bull run and once the macroeconomic backdrop changes and investment in the precious metal fades, probably sometime late next year, a secular retreat in the price will unfurl, according to the Thomson Reuters GFMS gold survey.
Nonetheless, gold prices rose 28 percent year on year in 2011, and prices may struggle for the short term and average $1,640 an ounce in the first half of this year.
”We are conscious that the Euro-zone crisis is far from over and its impact on liquidity, the value of the U.S. dollar and attitudes to risk could all become very apparent, particularly once buying linked to the Chinese New Year is behind us,” said Philip Klapwijk, the global head of metal analytics at Thomson Reuters GFMS.
However, the report said that prices should shrug off any lethargy and power ahead to fresh all time highs driven by investment.
”We could even see prices just over the $2,000 mark later this year or in early 2013,” Klapwijk noted. The report cited factors such as exceptionally low interest rates, enhanced inflation expectations basis monetary policy easing and a general mistrust of fiat currencies.
Thomson Reuters GFMS noted that the world investment rose more than 20 percent to a record $80 billion in 2011 in value terms, driven by growth in physical form and net bar purchases, with gains particularly strong in East Asia and western markets. However, growth in ETF holdings was slower than 2010 and the net investor long on Comex fell by more than 90,000 contracts over the year, leading to a drop of 7 percent in world Investment in tonnage terms, it explained.
”Such qualifications will have to be avoided if the above price forecasts are to be met,” the report concluded.