At a function cohosted by China National Gold Group Corporation and the World Gold Council, speakers from the Shanghai Gold Exchange and the Shanghai Futures Exchange also made introductory speeches on gold trading in China.
In his presentation, GFMS chairperson Philip Klapwijk said that an increase in overall supply was expected in 2009, owing to an expected further drop in net official- sector sales being offset by a modest increase in mine production, boosted by a record high in the recycling of fabricated products.
Moving to demand side, fabrication demand, which was dominated by jewellery, was forecast to fall considerably in 2009, owing to high and volatile gold prices coupled with the slowdown in the global economy. As a result, the market would move into sub- stantial surplus this year and much of the gap was likely to be filled by investors. GFMS believed that sustained concerns over the global economy and the health of the financial system would continue to fuel a safe-haven interest in gold.
Moreover, investors would increasingly focus on a newer worry, namely the probable longer-run inflationary consequences of governments’ and central banks’ ultra-loose fiscal and monetary policies.
GFMS, however, cautioned that it might well not be a straight line rally as a summer lull or the need for inflationary pressures to build could result in a period of sub-$900 prices in the short term.
“The price may have pulled back a fair bit from the February highs but that was largely just the market’s reaction to jewellery demand crumbling and scrap booming. We believe that it’s far from ‘game over’ for investors. The gold price in the coming months could easily reattain the $1 000/oz mark and is likely to push up towards a fresh record high before the end of the year,” Klapwijk said.

To subscribe to Mining Weekly's print magazine email subscriptions@creamermedia.co.za or buy now.