GFMS: Gold Investment "To Set New Record in 2012"

WORLDWIDE Gold Investment demand is expected to post a fresh all-time high this year in both volume and Dollar terms, according to leading precious metals consultancy Thomson Reuters GFMS.

Global investment demand in 2012 is expected to be close to 2000 tonnes of Gold Bullion, GFMS says, compared to 1605 tonnes last year – a figure which includes physical Gold Investment such as bars and coins as well as GFMS's implied figure, calculated as a residual balancing item from other data.

"The environment for Gold Investment should remain supportive this year," said Philip Klapwijk, GFMS's global head of metals analytics, speaking at the London launch of the consultancy's Gold Survey 2012, the gold industry's dominant data and analysis title, on Wednesday.

Klapwijk cited negative real interest rates and central banks' "monetary largesse" as likely to be factors supporting gold demand.

He added however that the current gold market environment is "probably not sustainable" in the long run. GFMS estimates that around $130 billion of Gold Investment demand is required to "clear the market" once Gold Mining production, scrap supply and jewelry fabrication demand are taken into account.

But on the other hand, argued Klawijk, central bank policies could be set to sustain current conditions for the foreseeable future.

In 2011, the bulk of Gold Investment was accounted for by physical investment, the GFMS report says. Although overall Gold Investment dropped 10% from 2010, demand for Gold Coins and bars worldwide rose 30%.

"The key takeaway," according to Klapwijk, "is the strength of physical investment [which saw] an excellent performance last year."

Klapwijk noted that "a lot of investment demand is coming from Asia and the emerging markets", with people in China, for example, facing "limited investment alternatives to gold."

GFMS notes China, India and Thailand as places where Gold Investment in physical bar form was higher in 2011 than the year before. Europe is also cited as a source of demand growth for investment Gold Bars last year. This is in contrast with North America – though Klapwijk pointed out that most physical Gold Investment in North America takes the form of Gold Coins rather than bars.

Europe has seen a big jump in retail Gold Investment from 2008 onwards, with 2011 seeing the strongest demand since the global financial crisis began.

"This is not surprising given the epicentre of the sovereign debt crisis is in Europe," said Klapwijk.

GFMS says it expects Gold Investment to remain the major Gold Price driver in 2012, adding that it is "bullish for the medium term.

"We could easily see last September's record high being taken out, and a push on towards $2000 is definitely on the cards before the year is out, although a clear breach of that mark is arguably a more likely event for the first half of next year."

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