The TWELVE-YEAR bull market in gold prices is “clearly over, at least for the medium-term future,” according to respected analyst Philip Klapwijk.
Formerly head of the Thomson Reuters GFMS consultancy in London, and now managing director of Precious Metals Insights in Hong Kong, Klapwijk was commenting on last week’s 10% crash in gold prices at the European Gold Forum in Zurich.
“There is potential for further downside,” he went on, “especially if we start to see producers start hedging risk” by selling their future production to lock in current prices.
Quoted by Dow Jones, Bloomberg News and also precious-metals specialist site MineWeb, Klapwijk added that a second risk is previously strong demand to buy gold from Asian central banks suddenly slumping, although he believes this to be unlikely.
A third risk would see Asian consumers fail to respond aggressively to this latest fall. Local reports already point to phenomenal demand on the drop in gold prices, however.
“If we get either a big one or a combination of these events we will get gold undershooting its equilibrium,” said Klapwijk, a 25-year veteran of precious metals analysis and repeat winner of the annual gold and silver prices forecasting contest held by professional trade body the London Bullion Market Association.
“Under those conditions," he told the gold industry event in Zurich, Switzerland, "we can definitely see a dip to sub $1000 levels. I think that is probably less likely to occur and, in the absence of such circumstances, gold will probably hold above $1200.”
Further ahead, and forecasting a “rough range” of $1200 to $1550, “with patience, we will likely see the gold price make new highs” in the next three to five years, thanks to government’s failing to cap their spending and debt, and with monetary policy remaining very weak worldwide.
Speaking separately to the Financial Times, however, Klapwijk also warns of gold investors becoming bittereinders – the name used of a small group of Boer guerrillas in South Africa who, after losing war against the British in 1902, kept fighting regardless.
“If you look at the last bear market [in gold, running from 1980 to 2000]," Klapwijk is quoted, "the true believers took an awful long time to start selling – or they had to die and then their children sold their gold."