JOHANNESBURG (miningweekly.com) – Investment demand would drive the gold price to an average all-time high in the first half of this year, recovering well into the $1 800/oz range on loose monetary policies and burgeoning sovereign debt, a report by Thompson Reuters GFMS, released on Wednesday, showed.

World gold investment was forecast to rise by just over 20% in volume terms and almost 30% in value terms to $48-billion for the first half of the year, in comparison to investment in the first half of 2012, the value of which swelled to a record $87-billion last year.

Despite the sell-off in the fourth quarter of 2012, the consultancy asserted that many of the factors that had underpinned gold’s bull run to date remained in place and would return to the fore this year.

“Although there is now growing speculation around the structure and longevity of the US Federal Reserve’s quantitative easing programme, policies of ultralow interest rates across the western economies will persist in 2013. 

“This will continue to support investor interest in gold in the absence of low-risk investments that can offer acceptable yields,” Thompson Reuters GFMS metals analytics global head Philip Klapwijk said at the report launch, in Toronto.

Concerns over economic growth in the major economies, its impact on central banks’ monetary policies and investor worry over sovereign debt levels were the key drivers of this inflow into gold, the report highlighted.

It added that confidence in gold was further driven by ongoing central bank buying of the metal last year, with the official sector’s net purchases estimated to have risen by 17% – levels last seen in the mid-1960s.

“Demand in this segment of the market was again driven by several central banks’ actions to moderate exposure to the major currencies and we expect that large net purchases by the official sector will continue this year,” said Klapwijk.

Further, GFMS reported that, in spite of high prices, mine production failed to respond meaningfully, rising just 0.2%, but nonetheless achieving record levels. 

The outcome was moderated by a handful of mining projects that faced setbacks, as well as widespread strikes in South Africa. 

Meanwhile, jewellery demand remained resilient, declining by just 4% – mainly a function of losses in India, which accounted for 85% of last year’s gross decline.

Also of note was a drop in Chinese jewellery fabrication, chiefly the result of a lack of a clear price trend, which reduced investment-related purchases, while global scrap fell by 2%, despite the 6% price rise. 

This was attributed chiefly to price acclimatisation, near-market stock depletion and expectations of higher prices to come.

In addition, producers’ hedging activities, which had been a key demand-side support through dehedging in the last decade, remained on the sidelines for the second year, with the global hedge book now much reduced in size and producers heeding investors’ demands to keep gold sales unhedged.