2009 gold price revised down - Standard Bank

2009 gold price revised down
Jade Menezies
Posted: Mon, 19 Jan 2009

[miningmx.com] -- The 2009 gold price could average $900/oz because of decreased demand and an easing of a prevailing supply deficit, said Standard Bank in its Equities Research report for this year.

“Our gold price forecast for 2009 has changed to US$900 from our previous forecast of US$980/oz” Standard Bank said in the report dated 16 January. The average price for 2008 was $872. The impact of the credit crisis will be strongly felt on the demand side for gold, it said. “A slowdown in global growth will likely affect fabrication demand specifically gold jewellery, electronics and other industrial components,” said Standard Bank. “We estimate the downturn in fabrication demand could be between 240 tonnes and 360 tonnes in 2009.” The gold price has not been immune to the global financial crisis; however, relative to almost all other commodities it has been an outperformer, said Standard Bank. The up-trend of the gold price depends heavily on the performance of the dollar, for which the outlook in the second half of the year is poor, MD of GFMS Analytics, Rona O’Connell told SAfm Market Update. “We could certainly see the old high challenged and possibly even taken out, but whether we can stay much above $1,000 for any reasonable period of time has to be open to question, I'd have thought,” she said. The main drivers of the gold price will be investment flows and speculators because the physical side of the market is weak, she said. “The investment fraternity is still relatively friendly but, as I say, not quite friendly enough yet, and the hot money is obviously one of the most important elements when it comes to pushing prices,” O’Connell said. “So, increasing investor activity, particularly from the institutions, from pension funds, is likely to create a drain on the metal supplies. That almost by definition would then be coloured by speculative activity, as speculators piggy-back on top of it - and that's going to be driven by economic and financial uncertainty,” she said. Standard Bank said its calculations now showed the physical gold market in a neutral position for 2009 against a previous expectation of a 315 tonne supply deficit. "We believe the gold price will be volatile and will likely rise significantly by fourth quarter 2009 on the back of seasonality and a gradual upward trend in global GDP. We maintain our long-standing view that the supply and demand fundamentals will remain intact for a long-term upswing in the gold price," it said. O’Connell said sales under the Central Bank Gold Agreement fell considerably during 2008 and was unlikely to be much different this year, meaning there is less gold available to the market.