GFMS Says Gold Could Dip In 2010

After topping US$1,200 per oz. in late 2009, gold could be in for a rough ride during the first half of this year, according to gold consultancy group GFMS.

The average gold price should fall to around US$1,175 per oz. during the first half of 2010, said GFMS chairman Philip Klapwijk during a recent Toronto seminar discussing the GFMS Gold Survey 2009 — Update 2.

“That may look like a conservative estimate but on a yearly basis this is quite significant growth,” Klapwijk said.

During 2009, the average gold price was US$972.35 per oz., an 11.5% increase from the average 2008 price of US$871.96.

But gold could drop back into the three-digit range over the next six months; GFMS predicts a range between US$990 and US$1,230 per oz.

“We do think this could be a fairly rough ride,” Klapwijk said. “There is a possibility for a significant correction in the next six months and that’s why we have a low field average for the first half of the year.”

Gold production, which has been flat or falling since its peak in 2001, actually increased 6% in 2009 to about 2,553 tonnes.

Klapwijk says gold production could increase again this year but warns that this is not a trend.

It may look like a “departure from the trend but our conclusion is that is not the case,” he said. “In all likelihood production will probably start to decline again in 2012 and onwards.”

Gold production has been declining for about a decade after an aggressive growth in the 1980s and 90s, which contributed to a bear market in the late 90s.

“The flat situation we’ve had since then has been supportive of higher gold prices,” Klapwijk said, noting, “Strange, in a sense, that we’ve had a quadrupling of gold prices but production remains below the level it was 10 years ago.”