New York 27/03/2012 - Gold prices won't reach a lifetime high this year as the stabilisation in the global banking sector reduces investors' motivation to chase prices upwards, the CPM Group predicted in its Gold Yearbook 2012.
Global economic, financial and political fears were the main drivers in gold's rise to a all-time peak of $1,920 per ounce on September 6, 2011. But soon after reaching that high-water mark there was a “palpable shift” in investor attitudes, CPM argued.
“Financial conditions and economic prospective still looked bleak but it was becoming increasingly evident that the dollar, the euro, the ECB and major commercial banks perhaps were not going to collapse,” CPM said.
Thus, investors stopped buying gold indiscriminately of price and began to purchase the metal on dips instead of into rallies, it added.
“Gold prices are forecast to remain at elevated levels during 2012 but are unlikely to rise above the record high level reached in 2011,” said CPM, adding that prices should still hold above the $1,500 this year.
Gold futures for April delivery on the Comex division of the New York Mercantile Exchange ended at $1,684 Tuesday.
In terms of 2011 market fundamentals, investment demand fell to 34.3 million ounces in 2011, down 5.8 percent from 2010 levels. Demand from investment community is expected to remain flat in 2012, CPM said.
“Even though net additions to private investor holdings slipped lower in 2011, a year in which prices touched a record high, the decline had followed two years of double-digit growth from already high levels of net additions to investor holdings,” the report said.
But investors in emerging economies, particularly in China and India, continue to buy gold as a form of savings, it added.
“Low real interest rates and various government restrictions over other investments have helped Chinese investment demand for gold to grow at a double-digit rate since 2008,” said CPM, adding that Chinese investors added four million ounces of gold to their holdings last year.
Meanwhile, central banks were net buyers of gold for the fourth consecutive year, adding 12.7 million ounces, up from the 10.1 million ounces in 2010.
Gold supply increased by 0.8 percent to 119.9 million ounces in 2011, marking the fifth consecutive annual increase. The gains were largely due to higher mine production, which rose to 70.4 million ounces in 2011, up 2.1 percent from 68.9 million ounces in 2010.
Gold scrap supply rose to 40.6 million ounces in 2011, up 0.5 percent.
“Higher prices boosted scrap sales of gold but broad consumer expectations for higher gold prices curbed growth,” CPM said.
On the consumption side, gold fabrication demand rose 0.6 percent to 72.9 million ounces in 2011, slower than the 2.3 percent growth in 2010.
“Despite higher prices, many consumers sought to purchase more gold jewellery, specifically in developing countries, as a hedge against inflation and form of savings,” said the report, which added that demand from emerging nations climbed to 50.2 million ounces, up from 49.6 million ounces.
However, developed countries’ demand for gold jewellery fell to 8.4 million ounces, down about 300,000 ounces.
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