Gold bullion investment will rise for the fourth straight year in 2017 as global political and economic factors are forecast to maintain buying interest, CPM Group said on Tuesday. "There has been a return of opportunistic generalist investors who had exited gold in late 2011 and early 2012," New York-based CPM Group said in its Gold Yearbook 2017.
CPM forecast gold bullion investment at 17.6 million ounces in 2017, up from 17.4 million ounces in 2016 and the highest since 2012 when it was 29.2 million ounces. The independent commodities research company pegged global gold coin demand at 7.5 million ounces in 2017, up from 7 million ounces in 2016 and the highest since 2013. "Most long-term gold investors do not seem to expect the world's financial and political systems to collapse. Rather, they see them as facing major structural problems that will not be easily resolved or repaired in any short period of time," CPM said.
"In the near- to medium- term as it is becoming clearer to (shorter-term investors) that, while there may not be a collapse in the financial system, clearly the present interest rate environment, global economic growth profile, levels of unemployment and underemployment, and political turmoil globally are all factors that warrant owning at least some gold as a portfolio diversifier." The lack of clarity regarding the outcomes of US President Donald Trump's campaign promises and interest rate increases by the Federal Reserve to raise interest rate hikes is expected to prevent precious metals prices from taking a clear direction in 2017, CPM said.
Fabrication demand fell in 2016 to an estimated 92.2 million ounces, down 4.1 percent from 2015 as gold prices rose in the first eight months of the year and jewellery demand fell in China and India, the two biggest consumers of gold fabricated products, CPM said.
Fabrication demand was forecast to rise slightly to 92.8 million tonnes in 2017. Central banks added gold to their holdings on a collective net basis for the ninth straight year in 2016 to an estimated 7.2 million ounces, up from 5.3 million ounces in 2015. Mine supply rose to a record high in 2016 and was forecast to continue rising into 2017.
Total 2016 supply, however, which includes mine and secondary supplies, also rose in 2016 but was still lower than 2012 levels. CPM said it expects total supply to rise again in 2017 due to mine supply.
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