For the first time since 1980, the investment demand for gold last year far outstripped the demand for gold jewellery, culminating in a bull run in gold stock investments.

This was brought about mainly as a result of the global financial crisis.

Global precious metals consultancy GFMS reported last week that jewellery fabrication in 2009 dropped by 19,8% and was a major contributor to a 16% drop in year-on-year gold production.

However, this did not signal a problem for the global gold market, which performed admirably in the financial crisis.

GFMS CEO Paul Walker reported that the gold market was buoyed by the investment sector. The rally towards gold as an investment tool was partly owing to the US currency falling at a rapid rate.

“Investors, especially the Chinese, have turned to gold as a preferred investment tool as opposed to the dollar because, during the crisis, a lot of people lost faith in the greenback,” said Walker.

He added that this would still be the case for at least the next two years. How- ever, a lot would depend on the first half of 2010.

Walker added that the investment case for 2010 would remain positive as long as major global economic markets kept interest rates as low as possible, concerns over sovereign debt were resolved and inflationary fears increased.

Looking towards the gold price, Walker pointed out that there would initially be some apprehension during the first quarter of 2010, which would keep the price stable at $1 200/oz. However, investors would be the prin- cipal drivers for price increases. He added that it was not inconceivable that the gold price would rally as high as $1 400/oz by the end of the year.

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