MUMBAI: Even when gold prices are on the decline in the past few weeks, analysts across the globe are forecasting a surge in the coming months.
In fact, some experts have even predicted a record high in gold prices in 2009, a year supposed to be the worst one in the recent past due to the looming recession. And that is the main reason for gold to perform well in a doomed year.
According to one expert, gold’s value could climb to a record high during 2009. Charles Gibson of Edison Investment Research said the cost of the precious metal may rise to $1,500 per ounce in the months to come.
Start trading in commodities from as low as $50. Join now
This, he told media, is due to the financial stimulus packages being introduced by governments around the world, which are creating a shortage of gold.
Currently, there is a 500-tonne shortfall of the metal. This is the result of financial institutions no longer leasing gold from central banks, which in turn has slowed supply.
Consequently, investors are turning to physical gold rather than futures in the metal with supplies of gold bars becoming limited due to an increase in purchases.
Gibson’s comments follow those of HSBC Securities’ James Steel, who told a news agency that worries over inflation are helping to drive the price of gold upwards.
World Gold Council said recently that the central banks are not selling as much gold as it used to under the CBGA.
According to WGC, the central banks have sold only 91 tonnes of gold in the first six months of the fifth and final year of CBGA from the 500 tonnes permitted under the agreement. And the pact will expire in September.
Total sales in the 2007-2008 year were 358 tonnes and sales in 2006-2007 year were 475.8 tonnes.
With France and Sweden currently the only professed sellers, the rate of sales has slowed noticeably and is likely to remain subdued for the remainder of year 5.
The CBGA was renewed in 2004 by 15 European central bankers after the pact signed in 1999 expired. The CBGA limits annual gold sales to 500 tonnes and caps total gold sales to 2,500 tonnes over five years in an attempt to moderate the flow of gold to the market.
In the first four years of the agreement, 1,727 tonnes of gold were sold. As of the end of 2008, the largest holders of gold in the world were: the United States, Germany, the International Monetary Fund, Italy, France and Switzerland.
