The price of gold is set to hit $480 an ounce by the end of the year as demand reaches a four-year high, particularly in India and the jewellery sector, a metals consultancy predicted on Wednesday.
The price “should hold firm in the coming months on the back of buoyant fabrication demand, before investment returns in force to drive the price toward the $480 mark before the year is out,” London-based GFMS said.
“This is not expected to prove the market top, however, with GFMS expecting gold to clear the $500 hurdle sometime in the first half of 2006,” the consultancy said.
Beyond solid economic growth, demand was spurred by changing attitudes among consumers who are now accepting a price of $430 an ounce for gold as normal, it said.
Gold was trading for $448 an ounce on Wednesday on the precious metals market in London. It hit a 16-year high in December 2004 when it traded at $456,75 an ounce.
World gold production should rise by 6,8% this year over last year, hitting a four-year high, GFMS said.
In the first six months, it surged by 10% to 2 034 tonnes on the back of a 16% increase in jewellery purchases, or 27% if scrap is excluded.
“The gains in jewellery offtake were noteworthy given that dollar gold prices rose by nearly seven percent year-on-year,” it said.
Growth in jewellery demand was strongest in India, with a year-on-year rise of 47 percent to 140 tonnes, spurred by modest rupie price rises and strong economic growth, the survey said.
Jewellery demand also rose in the Middle East on the back of strong gross domestic product (GDP) growth, record oil prices and currency strength, with Turkey leading the way at 16%.
In Asia, consumption rose by 10%, with China blazing the trail at 14%.
However, Europe was the only major region which registered a decrease.
The jewellery trade should slow in the last half of the year amid rising prices, with production expected to dip by one percent year on year, the GFMS forecast.
“The jewellery sector should still provide a firm base for prices in the $430 range and if gold prices fail to reach $480 we could instead see jewellery fabrication grow faster during the second half than indicated in our forecast,” it said.
GFMS also predicted investors would return in force in the second half, seeking safe returns amid uncertain economic conditions in the United States owing to the devastation from Hurricane Katrina and volatile oil prices.
GFMS meanwhile predicted annual growth of only one percent in gold mine output.
Mine production dipped by just over one tonne to 1 172 tonnes in the first half.
Losses of 15% in South Africa, the world’s biggest producer, and losses in former Soviet Union states outweighed gains from new mines in Australia and South America and a recovery at Indonesia’s Grasberg mine.
Sales by central banks more than doubled in the first half, reaching a record 407 tonnes, the GFMS added. – AFP