Thomson Reuters GFMS has forecast a struggling gold market for much of 2012, but according to Philip Klapwijk, chairman of GFMS, gold could rise above $2,000 an ounce in 2013. However, that could be the high watermark for the market.
GFMS is looking for gold to trade between $1,530 and $1,920 in 2012 and to achieve an average price of $1,731.
This trading range may seem highly optimistic as it includes a high above that seen in September 2011, when gold rose to $1,921, especially given the current condition of the market. Gold is currently dwelling around $1,640 and is stubbornly resisting any encouraging upward moves.
Klapwijk cited softer demand in key physical markets and slackening investment appetite for bullion as contributing factors to the current weakness. He also pointed to a widening gap between rising supply from mining and recycling and falling demand for jewelry and other goods. Given those fundamentals, there could be a surplus north of $130 billion dollars, he projected.
That amount of excess supply requires a strong investment appetite if prices are to rally, but the market is not overly eager to take positions in gold at this point. Investors appear to be looking for a cue to provide some clarity as to what position they should take.
Standard Bank optimistic
Standard Bank recently reported that open interest in COMEX gold has reached a twelve-month low.
“Net speculative length remains relatively weak at 472.1 tonnes (compared to the 2011 average of 671.3 tonnes), which signals a continued lack of confidence,” it said.
But the report goes on to say, “while investors are not overtly bullish, the drop in short positions is somewhat encouraging as a sign that investors are cautious of running too short.”