Gold will probably rally to a record above $2,000 an ounce next year, as central banks ramp up stimulus to sustain the recovery, according to Raymond Key, London-based global head of metals trading at Deutsche Bank AG.
"We'll take out $2,000, we'll go higher," Key said in an interview in Hong Kong, where he attended the London Bullion Market Association's annual conference. "That's on the view that they'll continue to print money."
Bullion is headed for a 12th annual gain on concern that stimulus by governments and central banks around the world to promote recovery from the global recession and combat the fallout from Europe's debt crisis will debase currencies and spur inflation. Holdings in gold-backed exchange-traded funds, or ETFs, expanded to the biggest ever last week.
"Gold out of all the metals will be the best performer," Jeremy East, global head of metals trading and structured inventory product at Standard Chartered Plc, said in a November 12. "The biggest driver of Gold will be the ETF."
Gold for immediate delivery, which rose to a record $1,921.15 an ounce on September 6, 2011, traded at $1,727.02 at 4:08 pm in Singapore, 10 percent higher this year. The metal advanced 70 per cent from December 2008 through June 2011, as the Federal Reserve bought $2.3 trillion of debt in two rounds of so-called quantitative easing.
"We're still working out the excesses that we've seen in the past," Jamie Sokalsky, chief executive officer of Toronto- based Barrick Gold Corp, the world's largest producer, said. "This takes time, and easy monetary policy is going to have to exist for some time."
The Fed said October 24 it will buy $40 billion of mortgage debt a month and probably hold interest rates near zero until 2015 to boost economic growth and cut the jobless rate. The Bank of Japan expanded an asset-purchase program on October 30 for the second time in two months and the European Central Bank has said it is ready to buy bonds of indebted nations.
Attendees at the two-day LBMA event, which ended yesterday, become less bullish about the prospects for bullion over the course of the conference. Gold will probably gain to $1,849 by September, according to the average response in a survey of delegates yesterday. That's down from a forecast for a gain to $1,914, according to a separate survey of delegates on November 12.
Gold slumped to a nine-week low of $1,672.75 on November 5 as better-than-forecast US jobs data strengthened the dollar. The Dollar Index, which measures the greenback against six major currencies including the euro, has gained 1.1 per cent this year as Europe's fiscal crisis weighed on the euro.
"The outlook's pretty positive for gold but people shouldn't expect too much, we're dealing with a market that's fundamentally long," said Deutsche Bank's Key, referring to bets on further gains. "The rally's becoming more mature."
Flows into ETFs may total 200 metric tons this year, from 175 tonnes in 2011, Barclays Plc said in a November 8 report. That's 4.6 per cent of total physical supply of 4,323 tonnes this year, according to Bloomberg calculations based on Barclays' figures. Brazil, South Korea and Russia are among countries that added gold to their reserves this year, data from the International Monetary Fund show.
Nations bought 254.2 tonnes in the first half of 2012 and holdings are on pace to exceed the 456 tonnes added in 2011, Ashish Bhatia, manager of government affairs at the producer-funded World Gold Council, said November 11.
"With central banks continuing to buy gold around the world and with the macroeconomic environment which is still there, the demand should remain very strong," said Barrick's Sokalsky. "We're not going to see the reaction on the supply side to make up for that in the industry."