Gold to Reach $2,000 by Next Year as Investment Rises, GFMS Says

Gold may climb to a record above $2,000 an ounce by early next year as concern about currencies and low interest rates spurs investors to seek a protection of wealth, Thomson Reuters GFMS said. Prices may rebound after Europe’s debt crisis strengthens the dollar and curbs liquidity, driving bullion down to as low as $1,550, the London-based researcher said today in a report. Investment, which dropped 7 percent last year, will gain in this year’s first half as scrap sales decline and central banks buy the metal, countering a drop in jewelry demand and rising mine production. The gains through next year may come as the metal nears the “closing stages” of its bull market, GFMS said.

“In the short term, the exchange rate can and does play a key role,” Philip Newman, a research director of precious metals at GFMS, said in an interview from London yesterday. “There’s still massive uncertainty. That uncertainty is therefore likely to encourage gold investors to remain in the market.” Central banks boosted net purchases more than fivefold to 430 tons last year, and may buy another 190 tons in the first half, GFMS said. Combined official holdings stand at 30,788.9 tons, data from the London-based World Gold Council show. “Attitudes among central banks haven’t really changed,” Newman said. “There’s still that desire to come into the gold market to diversify some of the assets away from foreign exchange and to boost gold holdings.”

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