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GFMS 2011 Gold Survey Released, Sees Gold Price Surpassing $1,600 Before Year End

Tyler Durden's picture




 

GFMS, arguably the most respected precious metals consulting company, has just released its much anticipated 2011 Gold Survey.
While the rather expensive 128 page report is not available for public
consumption (yet), the gist is as follows: GFMS sees gold prices
averaging $1,455 an ounce this year and sticking to a range of
$1,319-1,620 an ounce, executive chairman Philip Klapwijk told delegates at the launch of its Gold Survey 2011. Klapwijk
said the market had probably already seen the lows for this year, after
prices slipped towards $1,300 an ounce in late January during a
broad-based sell-off of commodities.Quoting Klapwijk: "Overall, we would not be surprised, therefore, to see gold break through $1,600 before the end of the year." Neither would Goldman, which needs to buy some more, thus expect a downgrade shortly.

Reuters summarizes the key supply and demand drivers:

SUPPLY

  • Total gold supply edged up a touch to 4,334 tonnes last year from 4,318 tonnes a year before, lifted by a 100-tonne increase in mine supply. Scrap and official sector sales fell.
  • In 2010, mined gold production edged up to 2,689 tonnes from 2,589 tonnes a year earlier, its third consecutive year of gains and its highest year of output since at least 1998.
  • China was the world's biggest gold miner last year, with 351 tonnes of production, followed by Australia, which mined 261 tonnes of gold.
  • The United States was third, mining 234 tonnes, and Russia overtook South Africa as the number four miner with 203.4 tonnes. South African production fell 7.5 percent to 203.3 tonnes last year.
  • Central banks turned net purchasers of gold last year, buying 73 tonnes. In the last decade's peak sales year of 2005 they sold 663 tonnes of gold, and sold 34 tonnes in 2009.
  • Gold scrap sales were at elevated levels, reaching 1,645 tonnes in 2010, though this was below 2009's extremely high level of 1,695 tonnes.
  • The United States was the single biggest seller of scrap gold back onto the market, with 143 tonnes of sales. China sold 138.2 tonnes of scrap gold, while Turkey sold back 122 tonnes.
  • The main seller in the last 12 months has been the
    International Monetary Fund, which completed a planned sale which saw
    it dispose of 403.3 tonnes of gold.

DEMAND

  • Inflows into gold-backed exchange-traded fund eased to 338 tonnes last year from 617 tonnes in 2009. This was more than outweighed by rising demand for coins and bars, however.
  • Physical bar investment leapt by two-thirds to 880 tonnes in 2010 from the year before, by far the highest figure of the last 10 years and more than triple the figure recorded five years previously.
  • Jewellery demand recovered in 2010 after the previous year's slump, rising 11 percent, but sales were still the second lowest of the last decade at 2,017 tonnes.
  • Jewellery consumption including scrap was highest in India last year at 657.2 tonnes, followed by China with 451.8 tonnes. Both increased their buying from the year before.
  • Consumption in the United States eased to 128.6 tonnes from 150.3 tonnes, while in Turkey it dipped to 70.6 tonnes from 75.2 tonnes. Italian consumption fell to 34.9 tonnes from 41.4.
  • Net producer de-hedging slipped to 103 tonnes from 236 tonnes in 2009, the lowest figure since 2005.
  • Industrial and dental gold demand rose 13.7 percent last year to 466 tonnes.

Bottom line, commenting on the outlook for 2011, Klapwijk noted, "the prospects for gold prices this year remain bright. Investors continue to be concerned about the outlook for inflation, with governments in general showing little appetite to tighten monetary policy significantly... Furthermore, growing price acceptance by consumers will help lift jewellery demand, while generated only a muted response from scrap. Together, these will help raise the support level in the gold market and provide a firm platform for investors to take gold higher. Overall, we would not be surprised, therefore, to see gold break through $1,600 before the end of the year."

Alas, we have gotten to a point where a conflicted hegde fund like Goldman, which talks its book on a daily basis, will likely have much more push on the price of gold. And with the firm now aggressively pushing the disinflation trade, following its downgrade of crude and copper, the precious metals will likely be the next to see the flush of weak holders.

 

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Wed, 04/13/2011 - 09:52 | 1164876 SheepDog-One
SheepDog-One's picture

Just cant be...GS called the top in everything (less equities of course) just yesterday! <sarc off>...or is it?

Wed, 04/13/2011 - 09:55 | 1164886 TexDenim
TexDenim's picture

Interesting that China is producing gold, not hoarding it.

Wed, 04/13/2011 - 09:58 | 1164894 Robot Traders Mom
Robot Traders Mom's picture

They are doing both genius. Hence the 450+tons of consumption while selling only 138 tons of scrap.

Wed, 04/13/2011 - 10:02 | 1164905 tmosley
tmosley's picture

You're doing a great job of broadcasting your own ignorance.

Congratulations.

Wed, 04/13/2011 - 10:11 | 1164930 Thomas
Thomas's picture

But you have very nice breasts.

Wed, 04/13/2011 - 11:21 | 1165235 bigdumbnugly
bigdumbnugly's picture

two very nice points, thomas.

 

 

but don't shortchange yourself.

Wed, 04/13/2011 - 10:17 | 1164947 SheepDog-One
SheepDog-One's picture

Theyre doing both. 

Wed, 04/13/2011 - 09:58 | 1164888 ak_khanna
ak_khanna's picture

The market operators ie banksters are driving the USD index down and pumping up everything else. This process will continue till there are no long positions left in the USD index and no short positions in any of the commoditie­­s, stock or currencies other than the USD.

The operators are then likely to take the long position on the dollar and short position on everything else. They would then use their money power to move the markets in the direction which would get them the maximum profit while screwing all other traders / hedge funds / investors.

The stock, commodity and currency exchanges have been reduced to gambling dens whereby the more powerful traders with deep pockets move the markets to maximize their own profits at the expense of the remaining not so powerful players. The big boys have enormous money power to move the markets in the direction which results in maximum profits for themselves­­. They effectivel­­y use the media to lure the other players in the market to a position where they would incur maximum loss.

The markets will fall only when the banksters have eliminated all the short positions and only they themselves have positioned themselves to profit when the market falls

OR

When an unexpected world event catches the banksters with their pants down and the softwares they use to rig the markets go berserk beyond their control.

http://www­.marketora­cle.co.uk/­Article245­81.html

Wed, 04/13/2011 - 10:04 | 1164914 BobPaulson
BobPaulson's picture

Yes, with their printing press they can corner all markets as long as people accept their paper in the trades. Can they force people to take these trades? Everyone in the US is trapped, and little people who are paycheque to paycheque can't get out of the way, but there are ways to avoid their steamroller, and some countries have interest in preventing them from cornering all trades.

Wed, 04/13/2011 - 10:08 | 1164920 hedgeless_horseman
hedgeless_horseman's picture

This process will continue till there are no long positions left in the USD index and no short positions in any of the commoditie­­s, stock or currencies other than the USD.

I hereby nominate the sentence, above, for most ignorant post of the week by someone who claims to have knowledge about that which he or she speaks.

Wed, 04/13/2011 - 10:33 | 1165040 rufusbird
rufusbird's picture

Familiarize yourself with the concept of 'open interest'.

Wed, 04/13/2011 - 17:33 | 1166859 Doña K
Doña K's picture

My hubby told me to stay out of all markets except getting physical.

Wed, 04/13/2011 - 09:59 | 1164893 smeagol
smeagol's picture

gotta get through this first.

Resistance at $1460-62

Hopefully later.

Wed, 04/13/2011 - 10:03 | 1164911 eigenvalue
eigenvalue's picture

Silver is better than gold. Gold has the tungsten problem but silver doesn't. You can easily use Archimedesprinciple to identify fake silver. 

Wed, 04/13/2011 - 10:13 | 1164931 tmosley
tmosley's picture

Not really.  It has always been possible to fake silver, using lead.

This is why I prefer rounds.  The ring when flipped.

Wed, 04/13/2011 - 10:17 | 1164946 eigenvalue
eigenvalue's picture

But the density of lead is higher than silver. If you try to fake silver with lead, the size of the bullion will turn out smaller.

Wed, 04/13/2011 - 10:17 | 1164961 tmosley
tmosley's picture

You make an alloy.  This has been a danger for ages, and is one of the main reasons we use coins rather than bars for currency.

Wed, 04/13/2011 - 10:19 | 1164956 SheepDog-One
SheepDog-One's picture

Watch out for the Chinese Pandas, weigh those suckers as I have 2 of them that are .8 oz.

Wed, 04/13/2011 - 10:06 | 1164919 Turd Ferguson
Turd Ferguson's picture

By year end? Screw that!

$1600 by 6/10/11.

Wed, 04/13/2011 - 10:12 | 1164936 Thomas
Thomas's picture

I will be watching the moon with my telescope for gold at the end of the year.

Wed, 04/13/2011 - 10:17 | 1164964 SheepDog-One
SheepDog-One's picture

Or sooner.

Wed, 04/13/2011 - 10:29 | 1165010 paddy0761
paddy0761's picture

Hey eigenvalue (or anyone), is it feasible to make fake silver bars with Molybdenum? I can't see it working as there would need to be a huge conspiracy to keep them out of industrial supply. The central banks don't hold silver, so you couldn't park the fake ones there. Is it just another bullshit Internet rumour? Google it.

Wed, 04/13/2011 - 20:29 | 1165192 Tedster
Tedster's picture

Gold and silver became money partially because they are hard to fake convincingly. That's the whole point. Numismatic coin collecting is a different matter, however, and even common coins like the British sovereign were reproduced - but using real gold, and in the proper proportion alloy. Modern bullion coins are the most liquid and readily identifiable way to hold gold or silver and do not generally require assay or sophisticated tests to determine authenticity. They are very nearly self-authenticating, because of the metals unique properties. Generally, If the weight and size is correct, the item cannot be anything except gold. Some prefer bags of US silver coins for the authenticity factor in a similar way. Large bars would be the only way of scaling up though, and those might require assay if

Wed, 04/13/2011 - 10:31 | 1165021 baby_BLYTHE
baby_BLYTHE's picture

Should we be expecting a HUGE correction this summer in PMs since QE3 is DOA?

Wed, 04/13/2011 - 10:47 | 1165089 Twindrives
Twindrives's picture

Uh... yeah...uh-huh....absolutely...this summer everyone is going to trade their silver and gold for ever more valuable U.S. dollars, you can count on it. I hope the FED has enough USD's in circulation to cover the mass exodus from PM's. <sarcasm off>

Wed, 04/13/2011 - 10:54 | 1165135 baby_BLYTHE
baby_BLYTHE's picture

Should I ever decide to sell any of my physical gold or silver at my local coin shop, this is something they report to the IRS correct?

One is supposed to pay capital gains on bullion (even though such is illegal on the Constitution), correct?

thx :)

Wed, 04/13/2011 - 12:08 | 1165427 Catullus
Catullus's picture

It's not a capital gain. It's the sale of a collector's item. Gets taxed at marginal income tax rate.

Don't bother. Just keep holding on to it. I know everyone likes to say this will be money eventually, but they never tell you that legal tender laws still exist. You must still clear transactions in dollars here. The likely scenario is that gold will be accepted as collateral on loans. That's when it's value really skyrockets.

Wed, 04/13/2011 - 13:27 | 1165826 baby_BLYTHE
baby_BLYTHE's picture

Thanx Catullus,

As is the theme of Peter Schiff's sophmore book, there is always a bull market somewhere

I honestly cannot see a bull other than in real money- Gold + Silver.

Wed, 04/13/2011 - 14:04 | 1166025 Temporalist
Temporalist's picture

Doesn't JP Satan...errr, Morgan already accept PMs as collateral?

Wed, 04/13/2011 - 21:32 | 1167545 SamThomas
SamThomas's picture

I believe the rate on the sale of "collectibles" is a flat 28%.

Wed, 04/13/2011 - 17:57 | 1166920 Diogenes
Diogenes's picture

If you need quick cash you can always borrow it using gold as collateral. I bet any bank would be thrilled to lend you paper cash against gold.

In due time you can pay off the loan in (depreciated) paper.

There is no tax on borrowed money.

Wed, 04/13/2011 - 11:10 | 1165167 Pegasus Muse
Pegasus Muse's picture

"GFMS, arguably the most respected precious metals consulting company, ... "

LOL.  Quite arguably according to our good friends at GATA:

 

"GFMS chief belatedly acknowledges that official gold data is no good"

http://www.gata.org/node/9720

 

"Likening GATA to terrorists, GFMS exec refuses debate"

http://www.gata.org/node/7420

 

"GATA Batting 1,000, Three Amigos Perma-Bears 000"

http://www.gold-speculator.com/grandich-blog/43747-gata-batting-1-000-three-amigos-perma-bears-000-a.html 

Wed, 04/13/2011 - 12:57 | 1165694 55mph
55mph's picture

1,600 is a piece of cake.  most wonder why it's not 1,600 right now.  what's it going to take?

 

 

Wed, 04/13/2011 - 13:09 | 1165733 falak pema
falak pema's picture

how about holding gold close to one's heart : pure gold plated penis anyone? I know those aborigenies in Borneo did a good bamboo job!

Wed, 04/13/2011 - 14:05 | 1166029 OutLookingIn
OutLookingIn's picture

 

 GFMS? Sorry - but don't believe everything that comes from this conflicted outfit!

 Their list of sponsor's reads like a who's, who of the TBTFs with all the nefarious characters attached, right down to the LBMA.

This report, like many others put out by the GFMS, is not going to rock their sponsor's boats. Far from it! It will say what they want it to say!

The truth be known, the gold price forecast is too conservative.

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