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Gold prices to climb 7.5% in H1

19 January 2007 12:12 (UTC +04:00)

LONDON-based minerals consultancy GFMS expects the gold price to reach $670/oz in the first half of this year, although it doubts whether the recent peak of $725/oz will be exceeded, the APA reports.
But if the situation in the Middle East deteriorated further, driving oil prices higher, gold could pass $725/oz later this year or early next year, GFMS CEO Paul Walker said yesterday.
Gold was trading at $630/oz yesterday, having gained strength from the weaker dollar. It has traded between $630 and $645/oz in the first two weeks of the year.
A year ago, GFMS forecast the gold price could average $521/oz in the first half of last year and exceed $600/oz in the second half.
At the time, the gold price was about $560/oz. The forecast turned out to be conservative, as gold rose steadily from $550/oz in March to a peak of $725/oz in May.
However, GFMS said in September that all the conditions were present for investor interest to drive gold above $700/oz by year-end, which did not happen, as gold did not exceed $650/oz in the second half of last year.
In its latest Gold Survey 2006 â€” Update 2, GFMS said the main reason for any strong rally in the gold price this year would be investor buying in response to actual and potential dollar weakness.
Investors would also respond to a slowdown in the US economy and would continue to switch from other asset classes, such as equities, to those perceived to be less risky.
Although in percentage terms there are more investors in gold, they remain a small proportion of the total universe of investors, which offers potential to widen the market.
Jewellery demand, which was weak in the first half of last year but recovered in the second half, was likely to show a similar performance this year as a result of buoyant economic growth in India and China. /APA/