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Gold prices will rise next year as the financial crisis pushes more investors into the precious metal safe haven, according to delegates polled on Tuesday during the London Bullion Market Association annual meeting in Kyoto.
The gold industry forecasts bullion prices at about $958.6 a troy ounce by November next year, according to the annual LBMA poll among delegates. The poll, which has been a reliable indicator in the past, compares with current prices just above $902.
Last year, LBMA delegates gathered in Mumbai correctly forecast gold prices surging to record levels and predicted that by September 2008 prices will be at about $840 an ounce, almost the correct level just ten days ago.
Jeremy Charles, the LBMA chairman, told delegates that gold's role as a safe haven has returned as a vengeance amid Wall Street's woes.
"High bullion prices are here to stay," he said. His bullish comments came as many delegates said they forecast gold prices in 2009 in a $700 to $1,200 an ounce range.
Gold prices hit an all-time high of $1,030.80 an ounce earlier this year.
Some delegates, however, said that while they were bullish on gold prices on the short-term because investors seeking refugee and forecasted prices as high as $1,000 an ounce, also warned that it was unlikely that record prices could be sustained during a long period as jewellery demand was likely to suffer.
The majority of the LBMA's delegates - a mix of about 500 mining executives, precious metals traders and brokers, bankers, consultants and central bankers - said that the US dollar will be weaker by November 2009 than today.
The majority - a 56 per cent - said the financial system will be in a better shape. A minority 21 per cent said the crisis will worsen in the next 12 months, while a 23 per cent said the crisis will be basically as bad as it is today.
Mr Charles, who is also head of precious metals at HSBC in London, said that investors were returning to gold as confidence in the US dollar and some assets classes was shaky. He said that the change was likely to be a structural change, rather than a short-term phenomenon that will fade away with calmer markets.
"Gold will be looked in a different way even when the credit crisis ends," he said.
Jonathan Spall, head of commodities sales at Barclays Capital, added that the gold market was witnessing a "sea change" as bullion was attracting new players, such as hedge funds, that previously considered the metal as a relic.
"Hedge funds see those days gold a much interesting place to be in," Mr Spall said.
Bankers at the Kyoto's meeting said spooked investor were so deeply worried about the stability of the financial system, than rather than just investing in gold, they were placing their money into physical gold, taking delivery of bullion bars and coins, placing their investment outside the financial system.
"Vault staff is doing a lot of overtime this week," a banker said.
The demand for gold coins - a popular bullion investment during crisis because its portability means it can be kept in vaults outside the financial sector - is now so intense that LBMA delegates said dealers around the world were running out of stock of popular coins such as South Africa's Krugerrand.
Delegates attending the LBMA also forecasted silver prices at $13.8 an ounce; platinum prices at 1,488 an ounce, and palladium prices at $390.1 an ounce.
