Commodities | Sep 04 2006
By Greg Peel
September is the month where jewellery makers traditionally start stocking up. Bloomberg reports the gold price has risen in September every year since 2000, and has only fallen in September nine times since 1975.
A Bloomberg survey reveals 18 of 28 gold specialists, from Sydney to Chicago, advise buying gold this month, with six on Hold and four on Sell. Adding to upside potential will be northern hemisphere traders returning from summer holidays.
Gold for jewellery demand (which typically forms 85% of global demand) has fallen off in the last couple of quarters as the price has been on a rollercoaster ride. Now that the price has settled, expectations are that the Indian and Chinese wedding seasons will drive renewed demand. Where once upon a time demand began to wane over US$400/oz, dealers expect US$650/oz to be the new US$400/oz.
India is set to become a major hub for global gold trade. India imports about 800 tonnes of gold for jewellery each year, the largest demand of any country. With a new futures contract set to start, India is hoping to become an international price setter.
Goldcorp CEO Ian Telfer has noted that gold production has remained flat in the last decade. He expects the gold price to rise US$200/oz in the next two years and that it may reach US$1000/oz.
The gold supply will not receive much help from Australia, where Surbiton Associates reports production has fallen to the lowest level in a decade. Output fell by 15t to 251t in the year to June 30.
Surbiton notes there are now many smaller start-up projects across the country, but a lot of these are simply reopening old mines. There is no sight of the next big source. Output at Kalgoorlie’s “Super Pit” fell 12,000oz to 164,000oz, to relegate the mine to second place behind Newcrest’s (NCM) troubled Telfer.
Investment in gold exploration has fallen from a figure of 60% of all mineral exploration late last century to 30% now. While exploration for other minerals has taken off, gold has remained flat. Surbiton finds a lack of investment in gold exploration in Australia rather disappointing.