JOHANNESBURG (miningweekly.com) – Thomson Reuters GFMS expects the gold price to average $1 279/oz for 2016, compared with its previous forecast of $1 184/oz.
In the second-quarter update of its 2016 Gold Survey, Thomson Reuters GFMS attributes the higher forecast to the “impressive gains” posted by gold so far this year and the changed sentiment stemming from increased economic and political uncertainty.
“The first half of 2016 had seen a dramatic change in the rhythm and flows of the gold industry, even long before Brexit. Encapsulating this, we estimate that, for the second quarter in a row, physical gold demand was down by more than a fifth year-on-year to a seven-year low, with Asian offtake being exceptionally weak,” the report says.
China’s overall gold demand continued to decline in the second quarter, with jewellery offtake down 31% year-on-year and gold demand from the retail investment segment down 12% year-on-year.
Jewellery consumption in India decreased 56% year-on-year to 69 t in the second quarter.
Global demand for gold exchange-traded funds (ETFs), however, set a new record of 568 t in the first half of this year, with interest centred on North America and London.
Gold mine supply increased by less than 2 t year-on-year to 744 t in the first quarter of this year and Thomson Reuters GFMS expects mine supply to contract 2% year-on-year to 770 t in the second quarter.
“There are relatively few new projects and expansions expected to begin producing this year and those in the near-term pipeline are generally fairly modest in scale, hence our view that global mine supply is set to begin a multiyear downtrend in 2016.
“Supply from scrap was up 9% year-on-year for the second quarter, aided both by the stronger dollar price and in many cases depreciating local currencies,” says Thomson Reuters.
The overall gold market is expected to show a small surplus for the first half of this year, with the lower physical gold demand offset by an increase in demand for ETFs.
Meanwhile, Thomson Reuters GFMS notes that the producer hedge book increased to 270 t in the first quarter of this year, a 23% increase on the hedge book at the end of 2015. Australia-based companies accounted for 50% of the gross hedging, with the majority of the net activity the result of Newcrest hedging a portion of its Telfer mine’s production to mid-2018.
Overall, 33 companies increased their hedge positions, while 25 companies reduced the size of their hedge book in the first quarter.