JOHANNESBURG (miningweekly.com) – Thomson Reuters GFMS expects the gold price to average $1 360/oz this year and potentially briefly approach a 2018 peak towards $1 500/oz on any external shocks later in the year as it believes that the geopolitical climate and equity markets will continue to support gold’s role as a risk hedge.
Political uncertainty, including Brexit negotiations, along with ongoing tensions in the Middle East will remain gold’s key drivers, Thomson Reuters GFMS noted in its fifty-first annual ‘Gold Survey’, published on Tuesday.
The survey further noted that the prospect for higher prices depends on risk hedging at the professional level, while grassroots activity should support a higher base price this year and next.
Meanwhile, physical gold demand increased by 10% in 2017, the first annual increase since 2013.
The main driver of this growth was a 13% increase in jewellery fabrication, while Indian demand surged 58% year-on-year as the market stocked inventory ahead of the Goods and Services Tax that was implemented mid-year.
Chinese jewellery fabrication demand fell by 3%, the lowest fall since the market surged in 2013, signalling that the market has now broadly stabilised, with 2017 demand 4% ahead of that of 2012.
Meanwhile, industrial demand rose by 4% in 2017 – the first increase since 2010 – to 380 t, buoyed by the electronics sector, which constitutes the bulk of total demand in this area.
Total identifiable investment posted a 24% year-on-year decrease to 1 205 t, mainly owing to the lacklustre demand for coins, which, at 249 t, was the lowest level since 2007, while bar demand also dipped 1% owing to a lack of price action and competition from other asset classes.
Meanwhile, exchange-traded fund inventory recorded positive additions, gaining 177 t in 2017 for a net dollar inflow of $7.3-billion, so that by year-end total holdings stood at 2 262 t, a 9% year-on-year increase.
In terms of supply, however, global mine production in 2017 posted a total 3 247 t – 5 t below the previous year, driven by environmental concerns in China and a crackdown on illegal mining in Indonesia.
Further efforts were also noted in Peru and Colombia, where police and military interventions to flush out illegal miners from key areas in the rainforest region led to a drop in output year-on-year.
Elsewhere, Russian production showed the standout gain at the global level, supported by a ramp-up at Olimpiada, while production in the US rose by 8 t, supported by new projects and higher grades at two key operations.
Global scrap supply fell 7% last year to 1 210 t, the first annual decline since 2014.
Decreases were widespread as a stable dollar gold price and stronger domestic currencies kept gold prices contained, with the lower price failing to illicit tightly held stocks.