New York, 17 January 2012: Commodities Now

CPM Group has released its annual Gold Long-Term Outlook report. Last year marked the 10th annual average increase in gold prices. The past decade was a period of declining mine supplies, rapidly growing secondary supply, declining net sales of gold from central banks (turning to net purchases by 2008), declining fabrication demand, and significantly larger volumes of investment demand relative to previous decades.

Over the coming decade mine supply is forecast to grow at a strong pace, secondary supply is expected to be flat, central banks and private investors are expected to remain net buyers of gold, and fabrication demand is expected to show signs of improvement. These factors are expected to equate to historically high gold prices, but an overall reduction in the rate of increase relative to the past decade. CPM Group’s Gold Long-Term Outlook posits that the annual average real gold price will peak in 2012, and that it will be several years before the 2012 average price is surpassed.

Investment demand for gold has risen sharply over the past ten years, from 9.7 million ounces in 2000 to 29.5 million ounces in 2011. The various economic, fiscal, and political problems that have attracted investors toward gold remain intact for the foreseeable future. These problems are not expected to drive gold prices higher at a similar rate seen in the past few years in the main scenario of this report, however. Instead, CPM Group suggests that investors will adjust to the reality of today’s economic and political environment. It is expected that investment demand for gold will remain at high levels going forward, but that investors will seek opportunities to buy at lower prices rather than chasing prices higher.

Central banks became net buyers of gold in 2008 and are expected to continue to add to their official monetary gold holdings over the next decade. The Gold Long-Term Outlook features detailed statistics on gross sales and purchases of gold from the official sector and contains a detailed analysis of central bank gold market activity.

The Gold Long-Term Outlook includes detailed analysis on mine supply by country. Mine supply growth is expected to grow at a healthy pace over the coming decade, in contrast to the decline in global output from 2000 to 2008. This section of the report reviews trends in the mining industry that have resulted in higher mine supplies in recent years, which are expected to remain key drivers of mine supply growth in the future. The report contains information on over 150 gold mine development and expansion projects expected to come onstream over the next ten years. The Gold Long-Term Outlook also concludes that secondary supply will be muted over the next ten years. Secondary supply has doubled from 2000 levels but is expected to plateau in the coming decade.

Gold fabrication demand is forecast to rise over the next 10 years. Gold jewelry consumers are expected to adjust to the historically high price of gold throughout the forecast period and respond positively to price declines. CPM Group’s report contains a detailed analysis of the sources of fabrication demand and a discussion on the trends expected to push demand higher.

Given the rise in Chinese gold mine production, secondary recovery, fabrication demand, and investment demand, a special chapter focuses on the Chinese gold market in this report.  China is the largest mine producer and refiner of gold and one of the largest consumers of gold. Gold fabrication demand and investment demand in China are expected to grow at a strong pace over the next ten years, outpacing growth in domestic supplies from mines and scrap.

The report contains an appendix containing historical information about each sector of the gold market as well as more in-depth historical statistics on investment demand, supply, official (central bank) transactions, fabrication demand, and prices.

The CPM Gold Long-Term Outlook is part of a series of long-term studies of precious and specialty metals markets. These studies are used by producers and industrial users for strategic planning and in the preparation of technical reports. In addition, institutional investors and physical traders supplement their internal research with CPM Group’s comprehensive analyses, conclusions, and projections. The reports serve as authoritative reference guides for gold market statistics. CPM Group sells the reports as stand-alone products, although most clients use the CPM Group reports as parts of broader consulting packages related to the specific metals markets.

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