Denver Gold Forum report: Murenbeeld, Walker diverge on gold price predictions

Denver, Colo. — The average price of gold could top US$1,100 per oz. in 2010 as central banks and investors buy up the metal amidst a new world economy, says Martin Murenbeeld, president of DundeeWealth Economics.

During a breakfast presentation at the Denver Gold Forum, Murenbeeld discussed both the bullish and bearish factors that will affect the gold price. In his eyes, the bulls will win out — a popular view at the premier gold industry event of the year.

“Slowly but surely, in my opinion, gold is going back to its days where it’s being held in precautionary form by people worrying about currency debasement, inflation, whatever it is you worry about,” Murenbeeld said.

But Murenbeeld’s view wasn’t held by everyone; notably GFMS CEO Paul Walker. As gold rose above US$1,000 per oz. on Sept. 14, the opening day of the forum, Walker hypothesized that the current investment demand for gold is unsustainable.

Walker sees gold staying between US$950 and US$1,100 per oz. in the near future, but believes jewelry demand is key to supporting the gold price, not ongoing investment demand.

“We will reach a juncture where all the new mine production is not going into any fabricated products, it’s just going to the vaults in London and the vaults in Zurich. Can that continue indefinitely? I suspect not,” he said. “The downside risk for the gold price is substantial; I think we’re on a tipping point.”

For prices to stay where they are at the moment, there needs to be ongoing positive investment flows into gold for the foreseeable future, Walker said. “If you don’t think that’s possible, you can probably guess where my thinking is on this.”

Murenbeeld, on the other hand, has become even more bullish during the past few months, since DundeeWealth’s July report put the 2010 average gold price at US$985 per oz.

“Since our July 3 forecast, central banks have complained more vociferously about the U.S. dollar and fiscal and monetary policy, which leads them more and more to think about shifting those reserves,” said Murenbeeld, standing behind his US$1,100 forecast. “This is a number I would like to you to factor in the back of your mind.”

Murenbeeld said gold is becoming an investment asset class again, thanks to the growth in exchange-traded funds (ETFs). With US$55 trillion managed in portfolios and only about US$40 billion worth of gold held in ETFs, there is a lot of room for growth.

“When you have gold in a portfolio, the portfolio performs better,” he said. “I believe you and I are going to slowly do what the old central bankers did.”

One year to the day that Lehman Brothers failed, Murenbeeld described the changes in fiscal and monetary policy that have occurred over the past year.

“We were in a tough recession, but September 15 (2008) made a tough recession a potential depression,” Murenbeeld said. “If those banks were allowed to fail, we would have been in deep doo-doo.”