Price of gold tipped to remain high
Tight supply, rising demand in India and increased central bank buying all factors but ore's safe-haven allure will eventually diminish
Gold prices will likely stay high next year as mine-supply is tipped to be restrained, demand is expected to pick up in India and the mainland and central bank buying will remain robust, according to the World Gold Council and Barclays.
But gold price is expected to be lower in a few years as its allure as a safe-haven asset diminishes with the global economy regaining stability, although it will still trade at relatively high levels due to supply constraints, say analysts at the British bank.
"We need to see a rise in investment demand to push gold price to record levels, five years out the trend is likely to be downward but prices will still be elevated in comparison to historical levels," said Barclays commodities research vice-president Suki Cooper.
Barclays' director of commodities, Jon Spall, said investors' interest in gold has been more subdued after the US government's recent third round of quantitative easing, or government bond buying, compared to previous rounds, since many who wanted to use gold to hedge inflation risks from the easing have already done so.
Over the long term, Cooper expected gold to fetch at least US$1,125 an ounce, the lowest price for miners to sustain production to cover cash production costs before accounting for fixed-assets depreciation. Barclays forecast gold to average US$1,810 this quarter, rising to US$1,860 next year. It fetched around US$1,725 yesterday.
Gold price has averaged US$1,718 an ounce this year, up 10 per cent from the same period last year.