A report by the CPM precious metals and commodities research group in New York City asserts “gold is entering a new era,” thanks to “a major rehabilitation of gold as a financial asset around the world” as investors look for safe havens in volatile times.
“Not since the Great Depression and World War II has sentiment about the state of financial and economic conditions been so pessimistic,” CPM noted in its newly released Gold Yearbook 2009.
“The market consensus appears to be that the gold price will remain strong, at least through the first four months of 2009. All of the factors that have been driving investors to buy gold continue to be in place,” CPM analysts said.
As the value of paper assets has been greatly diminished, CPM asserts that the “value of gold has been greatly advanced.”
The report projects that investors “will buy significantly more gold in 2009″ adding a record 52.3 million ounces to their holdings this year.
“In this environment, with gold prices relatively tight, such levels would be expected to propel gold prices to a new record high, surpassing their record $1033.90 in March 2008,” CPM analysts advised.
“Further demand for gold should be expected, and further price appreciation most likely will follow as well,” they predicted.
The analysts suggest that “the tremendous increase in investor could buying and the consequent rise in prices since 2001 instead may represent the beginning of a major restoration of gold as a financial asset in the world, with a concomitant upward revaluation in the price of gold.”
CPM projects that total global gold supply will rise 3.3% to 118.6 million ounces this year, as mine production recovers from 55.3 million ounces in 2009 to 57.2 million this year. Gold mine production could rise to 57.2 million ounces this year with more than half coming from Indonesia.
The analysts forecast “little change in South African gold production this year,” while U.S. gold production could decline to 7.45 million ounces. However, China’s gold output is expected to be a hefty 9.3 million ounces.
Meanwhile, CPM advises that net investor demand for physical gold is expected to be a record 52.3 million ounces this year, up from 43.3 million ounces in 2009.
However, CPM advises that gold fabrication demand will decline 7.9% to 71.3 million ounces this year as gold jewelry demand remains weak with an anticipated 7% decline to 56.5 million ounces in 2009.
The analysts also predict that central bank sales are expected to be much reduced this year with central banks expected to be net sellers of only five million ounces of gold or less. “Most central banks may have sold much of the gold that they have wanted to sell over the past two decades. They may sell much less going forward and are likely to sell less given current economic conditions.”