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End Of Bear Cycle For Gold Price In 2015 – Metals Focus

In a marginally more upbeat assessment of gold’s likely future supply/demand situation and pricing, Metals Focus is predicting the likely end to the gold bear market this year.

This is undoubtedly the season for some serious analytical treatises looking at last year’s gold supply and demand figures and for assessing what may occur in the year ahead. First we had the World Gold Council (WGC)’s Gold Demand Trends report for the 2014 year – See: India world’s largest gold ‘consumer’; China has biggest total demandThis was produced largely using figures supplied by major precious metals consultancy, GFMS – which is due to produce its own full report for 2014 within the next couple of weeks. Second in line there was the US CPM Group’s Gold Yearbook published last week – See: Further downside on gold prices limited – CPMand yesterday GFMS’s big UK rival, Metals Focus, published its own annual Gold Focus 2015 report. While all cover the same ground, the data produced often differs – not least with respect to Chinese figures.

We did take issue with the WGC figures for Chinese demand which put it behind that of India, albeit the WGC did somewhat hedge its findings on what it classified as ‘consumption’.  Even so because the report came from the presumed authority on global gold matters, virtually all the mainstream media, and many bank analysts are now saying that India has regained its position as the world’s No. 1 gold consumer, and will no doubt continue to do so until the WGC comes up with another report saying differently.  We quarrelled with this analysis as known Chinese gold import statistics for 2014, plus China’s own gold production, together came to comfortably over 1,000 tonnes in 2014, whereas the WGC put Chinese consumption as only just over 800 tonnes.

We were perhaps expecting Metals Focus to come up with somewhat similar figures in its report an analysis, largely because it uses much the same methodology as GFMS – indeed many of its leading lights came to it from GFMS, while its key China analyst used to work for the World Gold Council. But, we are happy to say that the Metals Focus analysis does come up with Chinese demand in 2014 as being comfortably over 1,000 tonnes, and well in excess of that of India.

Perhaps the main thing to take away from the report and analysis is that the consultancy now sees it likely that 2015 should see the end of the gold bear market.  It expects that there could be further interim disappointment for gold investors as it expects gold perhaps to fall further- perhaps as low as around $1,080 in Q3, with the start of Fed interest rate rises, but once the markets have adjusted for this it anticipates the gold price rising again in Q4, averaging over $1,200 for that quarter and ending the year around $1,270, with the stated implication that the yellow metal will see more meaningful gains in 2016.

In introducing the report in London (there were simultaneous report launches also in Mumbai and Toronto) Metals Focus director Nikos Kavalis said the organisation saw 2014 as something of a year of price consolidation after the sharp falls seen in 2013. Last year saw selling and shorting of gold reduced and 2015 is expected to see a further fall in institutional divestment.  Fundamentals are looking stronger with gold supply seen as continuing in deficit while, contrary to many others, Metals Focus expects that US interest rate rises could actually be gold positive eventually as at the kind of rises anticipated, real interest rates will still be negative for some time and once the rises are in place short positions built up in expectation of the rate rises would be unwound. Asian investment demand, which slipped back in 2014 after the very strong 2013 figures, is also expected to recover. Taken together with a small anticipated reduction in new mined gold output and with recycling expected to remain around last year’s reduced levels, all this points to stable, or even improved, fundamentals with investment demand also benefiting in 2015.

Thus there is the anticipation that any price downside will indeed be limited – confirming the similar view expressed in the CPM report last week. While all this suggests what might be seen as a certain degree of medium term pricing disappointment in US dollar terms, as in recent months the value in many other currencies, given recent dollar strength, may well see decent increases over the year ahead with the dollar index seen as possibly rising a further 10%, before it starts to come down from its highs.


Courtesy of

Lawrence (Lawrie) Williams has been involved with both the technical and the financial end of the mining sector for over 40 years, formerly CEO of top mining industry business publisher, Mining Journal Limited, he was Mineweb's General Manager and Editorial Director up until October 2012 and is now Consultant Editor. He has worked as a mining engineer on gold, platinum, uranium and copper mining operations.

China is the world’s biggest gold producer with more than 355 tons annually. Australia is second.
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