Johannesburg - Demand, and ultimately, the price of gold in 2009 will depend largely on the economic performance of the US and Europe in a global economic environment riddled with uncertainty.
"Everyone is saying that it's a good year for gold," said VM Group analyst Matthew Turner.
RBC Capital Markets analyst Leon Esterhuizen agrees the gold price should gain, but does not expect it to go much higher as demand is depressed, particularly that for gold jewellery.
Esterhuizen, who reckoned the gold price has increased in the first quarter seven out of 10 years, expects it to move up from current levels of about $870/ounce to $900 by end-March.
This compares favourably with Fairfax Securities' estimate of $885/$890 for the end of the first quarter. Thereafter, gold is expected to be seasonally weak in the second quarter, in line with a fall in manufacturing demand.
Manufacturing offtake comprises a relatively large component of overall gold demand, and tends to be softer mid-year as demand for festivals such as Christmas and the Lunar New Year fall away.
Fairfax Securities analyst John Meyer doesn't believe that gold prices will be "oversold in 2009", with the commodity expected to average $850 in the first six months of the year, and the price expected to touch $1 000 per ounce by year-end.
Investment demand for gold is not expected to be that good in the first half of 2009, especially in the second quarter. While the dollar has been volatile it has, nevertheless, proved resilient though the global economic crisis. As a result, investors have parked money in US bonds as one of the safer investment options.
According to Meyer, there will be a balance between the latter and the need to weaken the dollar to stimulate growth. Demand for and, ultimately, the price of gold will be dependent on external factors, notably the performance of the US and European economies.
VM Group, which brings out its gold price forecast later this week, anticipates a recovery in the US in the second half of 2009 as this is what has traditionally happened in previous times of recession.
This may lead to increased interest rates in the US, which will have a negative impact on the investment demand for gold.
Nevertheless, an increase in economic activity towards the end of 2009 and early 2010 should ultimately be good for gold demand, notably in the jewellery sector. This, in turn, will have a positive commodity price effect.
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