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Investment to drive gold in 2008: GFMS Posted: Thu, 17 Jan 2008 [miningmx.com] -- UK precious metals consultancy GFMS said investment demand for gold will outweigh a slump in fabrication demand and drive the gold price towards $1,000/oz this year. GFMS chairman Philip Klapwijk forecast gold to average $840 during the first half of 2008 with “$1,000 as a clear possibility for later this year.” The reason GFMS seems conservative on its predictions for the first six months lies in its view that a “short to medium term correction is possible, chiefly as a result of the speed of the recent price rise and the huge fund overhang on Comex.” GFMS reckons prices above $900 are “unlikely to be sustainable” because of the high level of speculative long positions and a “price-induced collapse in fabrication demand.” Should such a retreat take place GFMS estimates gold could slide back to the low $800 levels “partly as physical buyers are not expected to rush back in the face of such price volatility at elevated levels.” According to Klapwijk, the surge in investment demand this year will be driven by the same factors that fuelled the surge in the gold price over the last four months of 2007. “It’s far easier to argue that we’re at the start of a period of higher inflation and lower US growth, rather than we are emerging from the worst. All that is strongly pro gold moving forward. “We can easily see higher gold prices without fireworks in the Middle East or Pakistan, though any political drama there or elsewhere is highly likely to rally the price yet further,” he notes. GFMS estimates mine production fell by just over 1% in 2007 partly because of delays to development and expansion projects. Global cash costs rose by a “dramatic” 24% for the period January to September and hit a record level of $400/oz in the third quarter. On the demand side jewellery fabrication grew by 5% last year as gains in the more stable first half of 2007 outweighed losses in the second half when “yet higher prices and volatility took their toll.” Click Here to subscribe to our daily newsletter
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