London metals consultancy, GFMS, believes that gold prices are set for a gradual recovery in 2016 to over US$1,200/oz by year end. Thus far in 2016, the gold price, in US dollars, has climbed to almost 3-month highs as political tension and fears over the world financial system have led to buying interest in the yellow metal as a ‘safe haven’ asset.
“While gold is likely to remain under pressure for some time, the prospects look brighter for 2016, particularly in H2”, GFMS concludes, citing slower Chinese economic growth and the negative outlook for the yuan as reasons for price recovery, which should then attract investors into the market. The consultancy sees further contraction in global mine supply as another supporting factor.
In its Q4 2015 Gold Survey, GFMS estimates that total gold supply fell by 7% in Q4, due to an estimated 4% drop in mine production, the largest quarterly reduction since 2008. Q4 estimated mine production was 767 t, down from 849 t in Q3. For the year as a whole, mine production was 3,126 t against 3,120 t in 2014.
Physical demand picked up in Q4 2015 (2% year-on-year) but was down 2% overall for the year, after a significant decline in Q2.
GFMS cautiously bullish on 2016 gold price