Gold forecasters are optimistic about the prospects of price gains for the rest of 2017 as they expect investors will seek a store of value amid political uncertainty.
Spot gold traded around $1,247/oz on Monday, showing a $100/oz gain since the beginning of 2017. For South African investors, gold has become more attractive in the past week as political events have weakened the rand.
Higher gold prices coupled with rand weakness would also boost the share prices of JSE-listed gold mining companies.
The GFMS Gold Survey 2017, published by Thomson Reuters on Monday, predicts gold will average $1,259/oz in 2017 on global risk aversion and the resumption of Indian buying. In its previous annual survey, the firm predicted gold would average $1,164/oz in 2016. The actual average was $1,250.80/oz.
"The market is not yet quite out of the woods, but the longer-term prognosis is for further price gains even against the headwind of the US Federal Reserve raising rates," GFMS researchers said.
Safe-haven buying could accelerate later in 2017 if there were a far-right, anti-EU win in one of the continent’s elections or further unorthodox policies were implemented by US President Donald Trump.
Last week, Metals Focus said in its latest survey, Gold Focus 2017, that negative real short-term interest rates in the US and other risks should enhance institutional appetite for gold.
Metals Focus forecast gold prices could reach $1,475/oz before the end of 2017.
GFMS researchers said identifiable global investment in gold surged 52% to 1,580 tonnes, or 64% in value terms to $61bn in 2016, its highest level since 2012. This included a 34% increase to 2,056 tonnes in the volume of gold held in exchange-traded funds (ETFs).
By the end of February 2017, gold in ETFs had risen further, to a total of 2,155 tonnes.
Physical demand for gold in jewellery and industrial applications fell 18% in 2016, mainly because of India’s imposition of excise duty on jewellery manufacturing, destocking by retailers and the contraction of monetary supply. Chinese jewellery fabrication also dropped because of higher gold prices, weak consumer sentiment and a shift to lower-carat jewellery.
Central banks remained buyers of gold although the Chinese bought less than before. Of 257 tonnes net purchases of gold by central banks, Russia bought 201 tonnes.
Output from gold mines rose 0.4% in 2016 to 3,222 tonnes, but the rate of growth has been slowing for the past three years. In 2016, the US and Australia grew production but it fell in Mexico, Peru and Mongolia. SA remained in eighth place with a one-tonne drop to 150 tonnes.
Gold recycling or scrap increased 8% to an estimated 1,268 tonnes, mainly in India because of higher prices and to raise money for agriculture.
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