Wednesday, April 13, 2011

Gold to break $2,000/oz barrier, $5,000/oz barrier within decade if not sooner

The price of gold will reach $2,100 an ounce within three years and could rise to almost $5,000 by the end of the decade, according to a new report.

Rising demand for gold in China and India will drive the precious metal's continued bull run, analysts at Standard Chartered, the Asia-focused bank, predicted. They said low interest rates in America and a time lag before mines started supplying more gold would see the rally extend to at least 2014.

"Our base-case forecast is that prices rally to peak at an average of $2,107/oz in 2014, although our modelling suggests a possible ‘super-bull’ scenario of gold prices rallying up to $4,869/oz by 2020, should current relationships between Asian demand and gold persist," the analysts wrote.

The bank said there was a "powerful relationship" between income per head in Asian emerging markets and the gold price.

The report added: "We expect some headwinds for gold to come from higher US [interest] rates, but we find that the impact of higher rates is rather muted and we do not expect this to derail gold’s rally for now," they added. "More important, we believe, will be the impact of higher mine production. We expect a steady acceleration in mine-supply growth in the years ahead, which should overwhelm demand growth beyond 2014. Nevertheless, we expect an extended period of high gold prices." (read more)