Gold could rally above $1,300 an ounce this year, setting successive all-time highs, as uncertainty about economic recovery and a sovereign debt crisis stoke investment interest, according to a closely watched industry report released Tuesday.
Investment demand in gold should benefit from the threat of inflation as central banks cut interest rates to the bone to battle double-dip recession and high unemployment, respected metals consultancy GFMS Ltd said in its Gold Survey 2010 Update.
“I think we could easily see gold spike comfortably above $1,300 before the year’s out … further gains in 2011 are far from out of the question,” said Philip Klapwijk, GFMS Chairman.
“The United States has so far managed to side-step the sovereign debt crisis. But that could change in the future and that would undermine the dollar and boost gold,” he said.
In April, Klapwijk told Reuters there was a good chance for gold to hit $1,300 this year with investor-led price gains. At that time, however, he said the metal was near the final stage of its 10-year bull market run as record investment buying could not be sustainable.
On Tuesday, spot gold hit an all-time high at $1,267.20 an ounce. Bullion has quintupled since 2000 when it was trading at about $250 an ounce. Year to date, it was up about 15 percent.
And December gold futures on the COMEX division of NYMEX scaled an all-time peak of $1,273 as of 11:02 EDT (1502 GMT) Tuesday. The prior record of $1,268.50 had been set June 21 on the continuation chart.
INVESTMENT DOWN IN 1ST HALF 2010
World gold investment, which includes implied net investment, bar hoarding, official and other coins, dropped nearly 40 percent to 778 tonnes in the first half of this year from 1,260 tonnes in the same period last year, when investment demand hit a record high, GFMS said.
The London-based firm said the demand drop of the first half was due to liquidation in the U.S. futures market and gold’s declining price early in the year.
GFMS, however, forecast strong investor flows into gold for the second half of this year, driven by high prices and favorable economic conditions for bullion investment.
World investment was forecast to rise to 1,313 tonnes from 633 tonnes in the second half of 2009.
Jewelry demand was expected to rise 3.5 percent to 1,819 tonnes, recovering from a lackluster year in 2009.
In April, GFMS said that investors looking to preserve wealth from a global economic crisis in 2009 bought more gold than jewelry consumers for the first time since gold was rallying back in 1980.
On the supply side, total mine production was forecast to rise 2.4 percent to 2,637 tonnes.
Old gold scrap supply was forecast to rise to an all-time high 1,753 tonnes in 2010, surpassing a previous record 1,672 tonnes set in 2009.
