JOHANNESBURG (miningweekly.com) – The gold price is expected to reach an average of $1 259/oz, Thomson Reuters said in its ‘Gold Survey 2017’, released on Monday.
“Though gold prices are likely to remain volatile in the near future, we expect the market to regain its composure, as investors remain averse to risk,” it said.
Its forecast was partly predicated on this, but also on the expectation that the Indian market would start to find its feet again – after seeing a 37% drop in demand year-on-year in 2016 – helping to contain price weakness and providing a more stable backdrop for the returning investors.
“The market is not quite yet out of the woods, but the longer-term prognosis is for further price gains even against the headwind of the US Federal Reserve raising rates.”
Total physical demand declined for the third successive year, falling by 18% in 2016, largely on the back of sharply lower jewellery fabrication, although all areas of demand were weaker last year.
For China, higher gold prices, weak consumer sentiment and a shift to lower-carat jewellery were to blame for the 17% drop in yearly fabrication volumes, the third fall in succession that has now seen Chinese fabrication retreat more than 40% below the 2013 peak.
This dramatic drop in Asian physical demand in 2016 can, as with many aspects of the market, be viewed as the mirror image of 2013.
While there was a headlong rush for the exit by exchange-traded fund (ETF) holders and other investors in the western hemisphere in 2013, on the view that the financial crisis was abating, the upsurge in geopolitical uncertainty in 2016 saw a widespread return of investors in these regions, evidenced by the 524 t build in ETFs, the largest since 2009.
As a result, the focus of Swiss exports changed markedly with flows to India plummeting and those to London soaring.
Global mine production posted another yearly increase and, in so doing, chalked up another all-time high of 3 222 t.
The rise, however, was modest, said Thomson Reuters, adding that these record breaking habits were close to an end. “The growth rate has roughly halved every year for the last three years, partly as output from new mines has slowed and we expect production to contract in 2017.”
Highlights last year included an 8% rise in supply by the US, elevating the country to a nine-year high, and a 4% increase in Australia’s output to a 16-year high. The biggest losses originated in Mexico, Peru and Mongolia.
Scrap supply rose 8% in 2016 to 1 268 t, aided by the rising gold price and a 50% surge in Indian volumes. Indian flows were at their highest for more than a decade as higher prices encouraged destocking from consumers, as did a lack of available credit from the domestic banking system.