Investment Demand
Investment overtook jewelry as the biggest source of demand for the first time in three decades in 2009, according to GFMS Ltd., a London-based research company. Investor demand will climb 9.9% to 1,597 tons this year and another 11% in 2012, Morgan Stanley estimates. Of the 31 people surveyed by Bloomberg, 25 expect the bull market to continue next year.
The 3.5% decline in combined ETP holdings from a record 2,115 tons in December may be no bar to higher prices. When assets fell 3.7% in 2009, gold rose about 30% in the following 3 1/2 months.
"Near term, we like gold and we like agriculture," Jeffrey Currie, the London-based head of commodity research at Goldman Sachs Group Inc., told Maryam Nemazee on Bloomberg Television's "Last Word" May 13. The team correctly predicted this month's slump in commodities, telling investors April 11 to end a recommended trade in oil, copper, cotton, platinum and soybeans that returned 25% in about four months.
"Gold is simply pricing sovereign default risk, it still remains a big issue," Currie said. "There's a lot of concern over the end of QE and noise of QE3, so that kind of risk will continue to support gold prices. We see them trading up to the high $1,600s at the end of this year and going into the mid-$1,700s next year."