Wednesday, March 30, 2011

GFMS Chairman Says Gold Drivers Still In Place

As summarized at Mineweb, the chairman of GFMS, Paul Walker, believes that the same long-term drivers that have pushed gold up in the last ten years are still in place.
"There is a backdrop here of ultra-low interest rates, macro-economic dislocation, fears of global imbalances - the wrath of these things still remain solidly in place and that's really the bedrock of the gold bull rally... the essential underlying glue that holds this whole story together in my view, is ultra-low interest rates, negative real interest rates, growing imbalances across a range of asset classes. And, as a result gold has benefitted."

" We've always said gold is the canary in the coal mine here that's signalled that something is not quite right and trust me, the macro-economic situation is still not quite right," he says....
GFMS' interest-rate forecast calls for ultralow interest rates in the developed world to continue through next year. They won't stop until the bond vigilantes come out of hiberation, which the firm does not expect to happen anytime soon. Demand from mainland China and India should continue to push gold price up.

However, the metal is highly dependent upon investment inflows. Should those flows choke off, then gold will undergo a sustained tumble. Walker doesn't see that happening anytime soon, though; GFMS is confident that gold will reach $1,500 sometime this year and perhaps sooner.

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