GFMS: "Investment Demand Could Help Push Gold Price to New Record"

CONTINUED strong investment demand could be one of the factors that helps the Gold Price set a record average in 2013, according to precious metals consultancy Thomson Reuters GFMS.

GFMS, which published its 'Gold Survey 2012 – Update 2' Wednesday, says it expects gold will rise towards $1900 an ounce in the first six months of 2013. The consultancy forecasts that the Gold Price will average a record $1775 an ounce over the first half of the year, with ongoing loose monetary policy from the Federal Reserve and other central banks continuing to offer investors an incentive to Buy Gold.

"Although there is now growing speculation around the structure and longevity of the Fed's quantitative-easing program," said GFMS global head of metals analytics Philip Klapwijk, "policies of ultra-low interest rates across the western economies will persist in 2013. This will continue to support investor interest in gold in the absence of low-risk investments that can offer acceptable yields."

Despite gold investment by tonnage falling 1.2% last year, by value it set a record of approximately $87 billion, due to an all-time high average Gold Price for the year.

The Gold Investor Index, which gauges Western investor sentiment towards gold by tracking buying and selling on BullionVault, rose to 12-month high in December, the fifth consecutive monthly rise.

"[Although] gold has often experienced longer periods when it has suffered in line with a bearish commodities sector as investors have become risk averse...the much longer-term view...still points to gold maintaining a role as a hedge against risk," writes GFMS senior analyst Rhona O'Connell in the consultancy's quarterly newsletter.

"A good example of this is the activity in exchange traded instruments compared with the movements on the Comex," O'Connell adds, noting that Gold ETF holdings are far less volatile than the outright long position of Comex gold futures traders, which measures the total number of bullish bets.

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