LONDON, 5 April 2007 — The average price of gold in 2007 is set to break records because of interest from investors amid geopolitical uncertainty, the precious metals consultancy GFMS said yesterday.
“It’s looking pretty certain that the record in terms of the annual average, $614.50 back in 1980, is going to fall this year,” GFMS Chairman Philip Klapwijk said as the independent research group published its annual Gold Survey. Since the start of 2007 gold has traded at an average of $650 an ounce.
On May 12 last year, an ounce of gold hit a fixing price of $725.75 on the London Bullion Market, which was the highest level for more than 26 years. “I’d also be far from surprised if this year we saw the market moving above the 2006 high of $725,” Klapwijk said. “Quite whether we’d then get close to the all time high of 850 dollars is more doubtful, but I’d certainly expect the upward price trend to continue on into 2008,” he added.
Investors are piling into gold amid geopolitical concerns, since the yellow metal is seen as a safe store of value in times of high inflation and political tensions.
“GFMS’ view is that an investor-led rally into at least the mid-700 dollars is indeed probable over the next year or so,” the survey said. “This forecast presupposes further US dollar weakness, growing financial instability and a rise in international political tensions.” It added: “We’re not really seeing any evidence of investors starting to shun the metal for the long term.” Purchases of gold for investment had actually fallen by 13 percent in 2006 from 2005 levels to 743 tons. However, the value of demand grew by almost 18 percent to more than $14.0 billion. In tonnage terms, global investment accounted for 19.0 percent of total demand last year. Looking back, the consultancy said world gold supply and demand each fell by 5.0 percent in 2006. Mine production declined by 3.0 percent year-on-year to a 10-year low of 2,471 tons.
The world’s two largest gold-producing mines, Yanacocha in Peru and Grasberg in Indonesia posted combined falls totaling more than 70 tons, “thereby erasing much of the positive impact of new mines,” GFMS said.