TORONTO (miningweekly.com) – An average gold price of around $950/oz or even lower is possible this year if the global economic recovery gains pace, supporting conventional asset values and undermining assets like gold, which is seen as a store of value, London-based Natixis Commodity Markets said in a report on Monday.
“Although there remains huge uncertainty concerning the economic and financial markets, we feel the balance of probabilities favours an eventual resolution of economic imbalances, such that investor interest in gold and silver will gradually begin to unwind,” the firm said.
The fundamentals for the gold market are also not likely to support the price this year, with mine production forecast to grow, while the market will need to “digest” the International Monetary Fund's (IMF's) sale of its remaining 191 t, Natixis said.
On the demand side, the market will need to adjust to significantly lower levels of producer dehedging, as the global outstanding hedge book has been significantly reduced.
“We do not as yet expect a swing to substantial strategic hedging, but that potential should always be borne in mind,” the firm said.
Looking ahead to 2011, Natixis expects investment demand to decrease further, which should result in lower prices.
“With investment continuing to unwind in 2011, we would anticipate further price weakness, with an average below $900 probable,” the report says.
“However, with the ‘blip’ of IMF sales out the way, jewellery continuing to recover and fresh producer hedging being thin on the ground, the price retreat should not be spectacular and so this average could end up in the mid-$800s, although a slight retreat yet further, cannot be discounted.”
Gold was trading at $1 114/oz on Monday afternoon, after dropping briefly below $1 110/oz earlier in the day.
Last month, market watchers at GFMS forecast an average price of $1 175/oz in the first half of this year, and expect gold will trade between $990/oz and $1 230/oz during the six-month period.
Natixis has forecast an average silver price of $15/oz this year, followed by $13,30/oz in 2011.
Platinum is seen at an average of $1 550/oz this year, while palladium is forecast at $362,50/oz.
Natixis said it expects prices for industrial metals to firm this year, boosted by increased demand, especially from China, India and other Asian economies.
The company has forecast average prices in 2010 of $2 370/t for aluminium, $7 885/t for copper, 2 565/t for lead, $19 340/t for nickel, $17 500/t for tin and $2 800/t for zinc.