Gold is entering a new era, thanks to a major rehabilitation as a global financial asset
Gold appears to be enjoying a rehabilitation of its historical might and role as a financial asset, as investors look toward safe haven assets in these volatile times, says a new CPM gold report.
Dorothy Kosich
26 March 2009
A report by the CPM precious metals and commodities research group in New
York City asserts "gold is entering a new era," thanks to "a major
rehabilitation of gold as a financial asset around the world" as investors
look for safe havens in volatile times.
"Not since the Great Depression and World War II has sentiment about the
state of financial and economic conditions been so pessimistic," CPM noted
in its newly released Gold Yearbook 2009.
"The market consensus appears to be that the gold price will remain strong,
at least through the first four months of 2009. All of the factors that have
been driving investors to buy gold continue to be in place," CPM analysts
said.
As the value of paper assets has been greatly diminished, CPM asserts that
the "value of gold has been greatly advanced."
The report projects that investors "will buy significantly more gold in
2009" adding a record 52.3 million ounces to their holdings this year.
"In this environment, with gold prices relatively tight, such levels would
be expected to propel gold prices to a new record high, surpassing their
record $1033.90 in March 2008," CPM analysts advised.
"Further demand for gold should be expected, and further price appreciation
most likely will follow as well," they predicted.
The analysts suggest that "the tremendous increase in investor could buying
and the consequent rise in prices since 2001 instead may represent the
beginning of a major restoration of gold as a financial asset in the world,
with a concomitant upward revaluation in the price of gold."
CPM projects that total global gold supply will rise 3.3% to 118.6 million
ounces this year, as mine production recovers from 55.3 million ounces in
2009 to 57.2 million this year. Gold mine production could rise to 57.2
million ounces this year with more than half coming from Indonesia.
The analysts forecast "little change in South African gold production this
year," while U.S. gold production could decline to 7.45 million ounces.
However, China's gold output is expected to be a hefty 9.3 million ounces.
Meanwhile, CPM advises that net investor demand for physical gold is
expected to be a record 52.3 million ounces this year, up from 43.3 million
ounces in 2009.
However, CPM advises that gold fabrication demand will decline 7.9% to 71.3
million ounces this year as gold jewelry demand remains weak with an
anticipated 7% decline to 56.5 million ounces in 2009.
The analysts also predict that central bank sales are expected to be much
reduced this year with central banks expected to be net sellers of only five
million ounces of gold or less. "Most central banks may have sold much of
the gold that they have wanted to sell over the past two decades. They may
sell much less going forward and are likely to sell less given current
economic conditions."
From www.mineweb.com