By
Reuters
Published
Apr 15, 2010
Reading time
2 minutes
Download
Download the article
Print
Text size

Gold investment surpasses jewellery buying in 2009

By
Reuters
Published
Apr 15, 2010

By Frank Tang

NEW YORK (Reuters) - Gold investment demand in 2009 surpassed jewellery buying for the first time since 1980, boosted by strong inflows from investors looking to preserve their wealth, metals consultancy GFMS said Wednesday 14 April.



In its industry report titled Gold Survey 2010, GFMS said the current market balance, however, is not sustainable because demand led largely by gold investment is bound to fall at some point in the future.

"The current equilibrium is not only atypical but also unsustainable in

the long term, unless one believes that investment demand can continue for the foreseeable future at record levels," GFMS said in its annual report.

It said, however, there is still a good chance gold could rise to $1,300 this year or next with further investor-led price gains.

"In our opinion, the evidence is growing that such a rally would signal entry into the final stage of this multi-year gold bull market," the report said.

GFMS Chairman Philip Klapwijk told Reuters in an interview that gold will likely end 2010 near the high end of a range between $1,050 and $1,300, but he also said that prices cannot be supported at current levels with weak underlying jewellery demand.

Spot gold is currently fetching about $1,150 an ounce.

Bullion has more than quadrupled since 2000 when it was trading at about $250 an ounce. Year to date, it was up about 5 percent.

JEWELRY SLIDES AS OUTPUT RISES

In 2009, jewellery demand fell 20 percent to 1,759 tonnes, hurt by weak consumption during the worst financial crisis since the Great Depression.

Jewellery demand, excluding scrap gold, was even weaker, down 25 percent to 1,111 tonnes, GFMS said.

World investment, which includes implied net investment, bar hoarding, official and other coins, nearly doubled to 1,901 tonnes in 2009 from 973 tonnes in 2008.

On the supply side, mine production rose 7 percent to 2,572 tonnes.

"Production is not falling off a cliff as some had predicted," Klapwijk said.

He said that even though mine output had increased in 2009 and is likely to rise further this year, it is still far below a peak level of 2,646 tonnes in 2001.

Supply from old gold scrap climbed 27 percent to 1,674 tonnes in 2009.

"An important factor in the U.S. market has been the development of new capacity of the mobilization of jewellery scrap," such as the popularity of "cash-for-gold" businesses, Klapwijk said.

(Reporting by Frank Tang and Jan Harvey; Graphics by Stephen Culp;

Reuters Insider interview by Jane Grieve in London;

Editing by John Picinich)

© Thomson Reuters 2024 All rights reserved.