A-la Bank of England. Seems not everyone likes gold.
We have none in N.Z. so no worries eh?
"Sydney, Dec. 16 (Dow Jones) - The Australian
Bureau of Agricultural Resource
and Economics, or Abare, is downbeat on gold's
outlook in 2003, forecasting the
bullion's rally to end in the year as investors move
away from gold.
In a December quarterly report issued Monday,
Abare said there are signs that
some of the factors which boosted prices by 22%
from December 2001 to
November 2002 will not support gold prices in 2003.
The gold price has been rising since late last year, as
an uncertain economic
environment compounded by the Sept. 11 terrorist
attacks boosted its safe
haven appeal.
The reduction in hedging, or forward sales by
producers, weaker U.S. dollar, plus
the recent rise in crude oil prices and geopolitical
tensions also helped the gold
price rise to a three-year high of US$335.50 a troy
ounce Friday.
But Abare expects that as the global economy
recovers in 2003, investors will
move away from defensive assets such as gold and
toward other assets that
could offer higher returns.
"Gold is increasingly being ignored by investors
seeking a safe haven from
political and economic turmoil, with increased funds
being directed toward bonds,
cash and property," said Abare.
Accordingly, Abare expects the gold price to average
US$295/oz in 2003, down
4.5% from a projected US$309/oz in 2002.
"This weakening of the gold price is expected as the
rate of reduction in
producer hedging eases and as investors reduce their
safe haven investment
demand for gold."
In turn, the decline in producer hedging is likely to
slow in 2003, as the physical
market contango, or the premium for forward sales,
is forecast to rise as interest
rates begin to rise while gold lease rates stay low,
said Abare.
Thus, the net reduction in producer hedging in 2003
is likely to be 80 metric
tons, substantially lower than the 300-ton net
reduction in 2002 that was a key
contributor to price increases, Abare said.
On a more positive note, Abare expects the world
fabrication demand for gold
from the jewelry sector to recover in 2003 to total
3,650 tons from a projected
3,370 tons in 2002 as the gold price falls while
economic growth improves in the
key consuming countries.
As for Australia, the world's third-largest gold
producer after South Africa and the
U.S., Abare forecasts mine production to rise 4.5%
in its fiscal 2002-03 year
which began July 1 to 276 tons, from 264 tons in
2001-02.
The higher production, together with higher gold
price in Australian dollars, are
expected to fuel a 16%-rise in export earnings to
about A$5.74 billion in 2002-03,
Abare said.
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