Gold seen up at $1,000 by fiscal-end

Gold prices in the coming months could easily re-attain the $1,000 mark and is likely to push towards a fresh record high before the end of the year, according to latest GFMS report released in China on Wednesday.

The consultancy forecasts that the gold price will reach a new record high in the second half of 2009 as the threat of inflation will drive a new wave of investment.

GFMS on Wednesday launched the 13th Chinese language edition of its annual Gold Survey in Beijing co-hosted by China National Gold Group Corporation and the World Gold Council.

Philip Klapwijk, GFMS? chairman, commented on some of the major supply/demand trends unfolding this year. The consultancy expected some increase in overall supply in 2009.

This is because an expected further drop in net official sector sales could be offset by a modest increase in mine production and, especially, a record high in the recycling of fabricated products.

Moving to demand side, fabrication demand, which is dominated by jewellery, is forecast to fall considerably in 2009, due to high and volatile gold prices coupled with the slowdown in the global economy. As a result, the market will move into substantial surplus this year and much of the gap is expected to be filled by investors.

As Klapwijk commented, ?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 re-attain the $1,000 mark and is likely to push up towards a fresh record high before the end of the year?.

The consultancy believes that sustained concerns over the global economy and the health of the financial system will continue to fuel safe haven interest in the yellow metal. Moreover, investors will 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 may 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.