[miningmx.com] — THE gold sector’s “big bad bear’ – GFMS CEO Paul Walker – has been transformed into a gold bull stating that he himself might soon “go out there and buy physical gold.’
Walker cited the unwillingness by the governments and central banks of the United States and Europe to “grasp the nettle’ and tackle the fall-out from the global financial crisis head-on as the main reason for his change of heart.
Giving a presentation in Johannesburg on Wednesday on the release of GFMS’ latest authoritative annual review of the gold market Walker commented , “a year ago I had expected that the fiscal and monetary authorities would have got their act together a lot more than they have to date.
“I believed that macroeconomic policy would have changed sufficiently to put the end game in place for gold.
“That has not happened and we are approaching a tipping point in the market where you start to think to yourself – are we going into a Zimbabwe-like situation?
“I am staggered that I have just said that but, if you look at what’s going on, then something is definitely not right in the United States and Europe.
“Central banks and governments have an incentive to try and pull the wool over our eyes and pretend things are not the way they actually are.
“A gold price approaching $1,500 sends a very simple message to the policy makers which is that – we don’t believe you. “
A year ago in his presentation of the GFMS 2009 survey Walker had predicted the gold price would continue to rise but had sounded a strong warning that increases in interest rates would knock gold back.
He cautioned that such rises in interest rates could come a lot sooner than many gold bulls anticipated.
Walker said on Wednesday, “The macroeconomic data send a shiver down my spine and my opinion has been strongly influenced by the events of the last few months in particular looking at the unwillingness of the financial authorities to take action with the one exception of the United Kingdom.
“What has come out of the United States is a hodge-podge of special interest and pork barrel politics.
“Central banks have consistently shown an unwillingness to grasp the nettle of this problem. Economic players need a clear indication from central banks on the price of credit going forward.
“What the rising gold price is saying is that central banks have failed on their interest policies and it is the interest policies which are supposed to establish the credibility of the central banks.
“I would have thought that the rally in the bond markets would have come to and end by now but it has not and now we are starting to hear talk about QE (quantitative easing) three. Should there be a QE three then all bets are off and I would go out and buy gold.’
Walker added, “there is clearly not the political will to tackle these problems and, for as long as these problems remain in place, then I will be bullish on gold.’
GFMS predicted that the gold price would range between $1,319/oz and $1,620/oz during 2011 and would average $1,455/oz for calendar 2011.
Walker has been widely viewed for years as a gold bear – an assessment he has repeatedly denied and he did so again on Wednesday querying, “just how many times do I have to predict that the gold price is going to go up?
“I am not a gold bear but I have always been extremely cautious in my outlook.’
Walker singled out rising purchases of gold from India and China during 2010 as well as a drop in sales of scrap gold from those countries despite the markedly higher prices as key developments in the gold market during the past year.
He commented, “there has been a fundamental shift in expectations in the Indian gold market. The Indians believe the gold price will carry on going up and they have no interest in selling their gold at current prices.
“That also comes back to interest rates and the opportunity cost of holding the metal. “
Walker – who in previous years has sounded frequent warnings about declining jewellery demand from India which is one of the key physical underpins to the gold market – commented, ” Indian demand despite the high prices has blown me away.’
But he cautioned that much of the apparent jewellery demand from India may in fact be linked to investment expectations over gold which further increased the dominant role played by investment demand in determining the gold price.
Walker’s overall assessment was that, ” at some point gold will retreat but it is most unlikely to happen during 2011 and will probably not happen until well into 2012. “
