Gold will continue to be a star performer for investors in 2012, just as falling imports of the metal into India undermine the trade in Dubai, a leading precious metals expert said on Friday.
The yellow metal, which has been on a relentless rally during most of 2011, “will threaten to reach $2,000 per ounce this year, but ultimately fall just short of the mark,” said Jeffrey Rhodes, Global Head of Precious Metals and CEO, INTL Commodities, Dubai Multi Commodities Centre (DMCC).
Rolf W. Schneebeli, Gold Services AG, told Khaleej Times that the precious metal, which has been one of the top performers in 2011, has stabilized after the drop at the end of the year.
“The price will continue to break the 1660 level and stay above it. There is a good chance the price goes to the 1680 – 1700 level. The situation in the Gulf could drive the price higher short term,” said Schneebeli.
There has been a growing divide among banks and bullion analysts in their forecasts for the direction of gold prices this year amid deepening global economic uncertainty.
US investment bank Goldman Sachs recently cut its 2012 price outlook on gold and Commerzbank analysts said precious metals are likely to regain their shine and expected prices to rise sharply.
According to Goldman, the yellow metal remains among the top tier of commodities for equity investment despite the downgrade as low interest rates and diversification of foreign exchange reserves by emerging nations ensures that the central banks remain net buyers.Longer term, Goldman expects gold to trade between 1,550 per ounce and $2,000 per ounce over the next 12 months, “progressively favouring the upper end of the range.” “Gold should resume its upward trend as the year progresses,” Commerzbank’s head of commodity research Eugen Weinberg said in a note. Commerzbank said it expects the yellow metal’s prices to touch $1,900 per ounce by the end of 2012. The German bank said it expects gold prices to average $1,600 per ounce, $1,650 per ounce and $1,750 per ounce in the first three quarters.
On Friday, Rhodes, who was taking part in panel debate at ACI Financial Markets World Congress at the Dubai International Convention and Exhibition Centre, saw the present weakness across the precious metals sector, and a strong track record in performances over the last ten years, as factors combining to present good buying opportunities.
Analysing the potential for investment in precious metals this year, Rhodes said that while gold has gained by 5.43 per cent from the end of 2011 to its current price of around $1650, this is well off the high of $1790 posted at the end of February.
“I remain cautiously bullish for 2012 as a whole and see the current weakness across the precious metals sector as a buying opportunity,” he said. “In a world devoid of yield, money managers need to invest in asset classes that will give capital gains, and moreover they need to point to track record when explaining their investment strategies to their investors.
“Gold is the star performer in global markets, gaining 480 per cent over the last ten years, posting an increase in the annual price in each of those years with an average annual return of 20 per cent per annum.
“While some would argue that gold is simply a counter currency investment to the US dollar, the fact is that gold has performed well in a wide range of currencies. During the period 2001 to 2011 gold rose by 273 per cent in Euros, 280 per cent in yen, 353 per cent in Yuan, and 436 per cent in Indian rupees,” said Rhodes.
He said silver has been even more impressive with the average price in 2011 almost 600 per cent above 2001 with an annual average return of 23 per cent per annum over those ten years. “Platinum and palladium rose by an annual average of 14 per cent per annum and 10 per cent respectively over the same period.”
“We expect a high for gold in 2012 of $1,975. I think that gold can be such a tease that it will get everyone excited about a price north of $2,000 only to let us down. Our suggested low is $1,465 with an average price for 2012 of $1,727,” said Rhodes.
He said the projected high for silver this year is $50.25, with a low of $22.25 and an average price of $36.25. Platinum is expected to reach a high of $1,940 with a low of $1,305 and an average price of $1,735 for the year. Palladium is projected to reach a high of $920, a low of $565 and an average price of $765.
“The prospects for the gold trade in Dubai, as a proxy for the Middle East, are very much tied to the outlook for physical gold demand in India. Following the recent actions by the Indian Government to raise import duties, imports of gold into India are this year expected to be sharply down on 2011, which will impact Dubai’s gold trade,” he said.
The two-day congress is hosted by the UAE Financial Markets Association, which was established in December 2011, and is an affiliation of the Association Cambiste Internationale (ACI), the global umbrella body of the national financial markets associations around the world.