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A rush
for gold
GOLD is making a comeback on world markets as
increasing demand and a shortage of supply push up prices. As global stock markets wobble, interest rates rise and the US dollar falls, one Australian analyst is predicting gold will double in value as producers scramble to overcome supply bottlenecks and possibly find new deposits. Angus Geddes, director of well-known investment firm Fat Prophets, expects the price to rise from the current $US430.28 ($A552.03) per ounce to $850 ($A1090) per ounce or more in the next three to five years. "A lot of people say that's a big increase but in the historical context of the past 25 years it's not that much of a move," Mr Geddes said. Gold touched a low point in 2001 at around $US250 ($A320) per ounce amid talk the world's central banks would sell off their massive gold reserves. But it has gained steadily since then, a trend Mr Geddes expects to continue. That is good news for local producers and for Australia's chronic balance of payments deficit, again reaching record proportions according to new figures last week. Keith Goode, an industry analyst with Taylor Collison, said local prospectors were struggling to find enough new deposits. "At present you can't get (drilling) rigs for love nor money," Mr Goode said. Meanwhile, miners face a shortage of basic equipment. "There are not enough vehicles and there are not enough tyres," Mr Goode said. Gold projects have long lead times but producers cut back on exploration and development during the slump a few years ago, exacerbating supply problems now. The production squeeze coincides with a big increase in demand from markets in East Asia and India. India, where gold jewellery is treasured for traditional wedding gifts and other presents, is enjoying an unprecedented economic boom, a phenomenon analysts expect to continue. Already the world's largest single market for gold, India consumed 40 tonnes more gold for fabrication last year, according to figures from the London-based consultancy Gold Fields Mineral Services. Elsewhere in Asia demand is also on the rise. In Japan, for example, demand for gold increased 70 per cent last year amid concerns about the stability of the country's financial system. Demand in China, also in the midst of an economic boom, is set to take off after authorities relaxed strict regulations governing its sale. Overall, consumption of gold for fabrication jumped by 50 tonnes in East Asia during 2004 alone, according to Gold Fields. It all adds up to a major shift in gold's fortunes, according to Fat Prophets' Mr Geddes. "There's actually going to be a change in the underlying supply and demand," he said.
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