Gold commentators like GFMS’s Paul Walker talk about the vulnerability of the gold price’s current dependence on investment demand.

Unlike jewellery demand, the traditional gold-price underpinner, investment demand can vanish with the click of a computer mouse.

But there are many who do not see investment demand going away soon and among them is Gold Fields CEO Nick Holland, who says that there will be more investment 
demand for gold in 2010, and that the 
phenomenal investment demand for gold in 2009 was only the start.

“There’ll be more investment demand in 2010 and there’ll be continued growth of new funds looking to have a piece of gold,” Holland tells Mining Weekly in a videod interview that 
can be watched on Mining Weekly’s website.

“It will be the continuing investment demand for gold that will be the main thesis behind the improving gold price,” he adds.

Jewellery demand will not be the solution to the gold price rising – “I think we have to make peace with that”.

Investment demand, he points out, is currently only 0,8% of the total global investment funds under management.

While some say that exchange-traded funds (ETFs) have run hard now and that they are going to be sold off, Holland says that, for every one person wanting to sell an ETF, there are two to three people wanting to buy one.

Even if gold investment demand rose from 0,8% of the total funds under management to 1,2%, a huge amount of gold would be 
absorbed.

“Also, central banks are buying, not selling. So, net, I think it’s positive,” Holland adds.

He says that the primary supply of gold is going to continue to decline on the back of a dearth of exploration projects and a dearth of exploration dollars over ten years, now starting to manifest itself.

Also, mining cash costs are rising as good-quality deposits are replaced with low-
quality deposits.

“All of this augurs well for the gold price. I would like to believe that we have a reasonable underpin where we are now and that the price can go higher from here,” he adds.

To watch a video in which Gold Fields CEO Nick Holland tells Mining Weekly Online’s Martin Creamer that, far from diminishing, there is more investment demand for gold ahead, click here.

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