Kitco News) -The consultancy GFMS looks for gold-investment demand to remain buoyant in the second half of the year, although analysts say a correction is also likely in the short term.
GFMS officials addressed the state of the gold market during a presentation in Moscow for the launch of Russian versions of its annual gold, platinum and palladium surveys.
Gold this week topped $1,600 an ounce for the first time. The metal has been underpinned by fresh inflows from institutional and private investors, particularly into physical bullion bars and coin products, GFMS said. Supportive influences include real negative interest rates that are expected to stay low or negative in leading economies and persistent concerns about sovereign-debt levels, causing a growing number of investors to view currencies with suspicion, GFMS said.
“We think that the shift in the composition of investment towards a greater share for physical gold demand…and a higher proportion of buying accounted for by private investors in Asia, especially in China, ought to mean that investment will be more solid and somewhat less prone to short-term sell-offs of the kind seen in the futures market in late 2010 and early 2011,” said William Tankard, senior mining analyst with GFMS.
Still, some corrections will occur. And, Tankard said, the run-up to the $1,600 level may have left the gold market “over-extended” for now. The upward trend may be accompanied by greater price volatility, with scope for downside movement over the next couple of months, GFMS said. However, the consultancy said, any setback should be short-lived, with the mid to low $1,500s likely to be a potential price floor.
“The pace of the run-up presents scope for a correction in the near term, but GFMS expect additional price strength later in the year in response to sustained financial difficulties, rising concerns over inflationary pressures and potential for further fiat currency instability,” Tankard said.
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