GFMS maintains forecast of $1 000/oz gold by year-end (Source: Mining Weekly)

By: Jade Davenport
Published: 4 Feb 08 - 20:21

Precious metals consultant GFMS CEO Dr Paul Walker reiterated on Monday that the gold price could reach as high as $1 000/oz by the end of 2008.

Addressing delegates at this year’s Mining Indaba conference in Cape Town, Walker predicted that the gold price would average $866/oz and would not descend beyond the $800/oz mark.

Walker said that it was expected that the same factors that had been driving gold higher would continue to fuel demand this year.

These factors included a weak dollar, record oil prices and a threat to US economic growth brought on by the sub-prime crisis, which also caused the gold-price to top $900/oz, Walker stated.

Walker explained that this was the case because gold was usually seen as a safe haven for investors in times of economic distress and inflation.

These prices were supported by a tight supply envirnment.

In this regard, mine production in the first half of the year was forecast to grow by about 2%.

This was due to the fact that the high gold price would compel miners to produce more and because of new projects coming into production.

In addition, GFMS forecast over 250 t of output growth between 2007 and 2010.

Walker continued that overall supply of the yellow metal was expected to increase back up to around 4 000 t/y this year.

Similarly, output fell 1% last year as South Africa, Peru and the US scaled back production.

The exception to this was China, whose increase pushed it above South Africa as the world's top gold producer.

Walker further predicted that investment demand would surge this year owing to gold's value as an alternative investment when interest rates dropped and inflation increased.

Jewelry fabrication, which accounted for 63% of total gold demand in 2007 was expected to fall about 20% during the first half of the year, mainly due to higher gold prices.

However, while GFMS was extremely bullish on the future gold price and insisted that the market was in the midst of a genuine bull rally, Walker warned that the present upcycle may be nearing its end.