Gold prices are expected to break the US$2000 an ounce barrier this year, according to Thomson Reuters GFMS, the world’s leading precious metals research consultancy.
Speaking at the launch of the consultancy’s first update to Gold Survey 2011, GFMS chairman Philip Klapwijk said that although gold prices might encounter a soft patch, the price was still likely to reach the $2000 mark due to further investment growth.
He cited several factors that made the new price high probable including:
- The recent intensification of the sovereign debt crisis
- The deterioration in prospects for the world economy
- The maintenance of low interest rates
- Fears over the emergence of inflation in the industrialised world
- A continuation of high levels of inflation in many emerging markets
- The outbreak of conflict in North Africa and the Middle East
“In some ways, the confluence of (these) events created the ‘perfect storm’ for gold investments and so, in the light of these developments the price spike to over $1900 intraday becomes readily understandable,” he said.
“The lack of resolution to sovereign debt matters and ongoing gloomy news on the economic front also makes it likely that this pro-gold environment will continue, and it’s this that forms the basis for the assault on $2000.”
Klapwijk added that gold prices have also benefited greatly from resilient jewellery purchases.
According to the consultancy, gold jewellery sales grew by 7.5 percent year on year in the first half of 2011 despite a 25 percent rise in the average price over the same time period.
Most of these gains were “mainly the result of buoyant economies, bullish price expectations and troubling domestic inflation” in India and China.