Gold set for boost from dollar, says bank
By Reuters
Published: July 24 2001 21:06GMT | Last Updated: July 24 2001 21:08GMT
The price of gold is expected to move higher over the next three years, boosted by a weakening US dollar, stronger world demand for the precious metal and limits on gold sales, a study released by Toronto-Dominion Bank said on Tuesday.
The study by the bank's economics department said the US dollar, in which the gold price is usually expressed, is expected to depreciate by 5 per cent on a trade-weighted basis next year, raising the price of gold by a similar amount.
"A weakening in the US dollar is expected to boost the price of gold to $290 an ounce by the end of 2002," Craig Alexander, a senior economist at TD Bank, said in the study.
"Continued growth in world gold demand and limits on gold sales and lending by central banks should allow the price of gold to reach $320 by 2004," the study added.
Gold has ranged from $252.80 to $326.25 an ounce in London over the past 52 weeks. The low gold price, which has made it uneconomical for many gold miners to produce the metal, has constrained supply.
Over the past decade, newly mined gold increased by 2 per cent a year. Last year, the 2,573 tonnes of gold mined fell short of the 3,946 tonnes used in jewellery, fabricated products and investments, Mr Alexander said.
He also blamed central bank sales and gold lending for the depressed gold price, noting that many countries have been selling their gold holdings over the past decade after concluding they held excessive quantities.
"With mined gold and scraps falling short of world demand, it is clear that central bank gold sales and the increasing practice of gold lending have been the main culprit behind the weakness in gold prices," Mr Alexander said. |
