Gold Price Outlook
On Friday, June 17, 2011 18:37 by Sudip Bandyopadhyay
In a recent Standard Chartered study of gold mine production from 2011 to 2015, it has been mentioned that gold mine production CAGR for the next 5 years will be 3.6% at the base case or down 1.2% CAGR in a bear case or up 5.6% in a bull case.
The limited supply comes at a time when Central Banks across the world have completely changed their strategy on selling down their gold stock and are now likely to accelerate their respective net buying programmes. In case of China, the fastest growing economy in the world, only 1.8% of reserves are in gold compared to global average 11%. Thus if China tries to bring up Gold reserves in line with the world average, they need to buy additional 6000 tonnes of gold which will be equivalent to 2 years entire world production.
We believe that the factors that can potentially drive the gold price to a significantly higher level from the ones currently prevailing are :-
· Limited gold production
· Low growth possibility in gold production
· Continuous buying by Central Banks
· Increased demand from India and China
· Relative weakness of US$ and inflation / deflation issues in the world economy
