The price of gold is currently sitting at a nine-month lows, but wealthy investors continue to invest in bullion bars as demand remains strong.
Victor Thianpiriya, ANZ gold analyst, said ongoing tensions in the Middle East have increased appetite for the yellow metal, which has typically served as a safe haven asset in times of geopolitical strife.
Talking to the Sydney Morning Herald, he said: “More and more central banks are starting to print money now as well. All the reasons are there for people to diversify some of their portfolios into precious metals.”
His comments came in response to a UK Telegraph article that revealed 12.5 kg bar sales have shot up 243 per cent in 2013, according to figures provided by British precious metals dealer Bullion By Post.
People are also buying more 1 kg gold bars, with the company reporting purchases doubled in the three months to August this year.
This is despite a slump in gold prices, which Mr Thianpiriya said can largely be attributed to a softening in Asian demand. He added that this is likely to continue to suppress values until 2015.
The precious metals expert said China is the primary market in Asia, but the country’s consumption had slumped in recent months. This trend could be due to oversaturation.
“I think it’s a case of buying too much, maybe eyes too big [for] the stomach sort of syndrome where they bought too much and now they are suffering from a case of a little bit of indigestion,” he explained.
“That’s going to take a few quarters to work through and is going to keep the gold price depressed and physical demand on the sidelines.”
Buying gold in 2015
According to Mr Thianpiriya, gold prices will continue to drop in early 2015, but will begin to climb steadily in the latter months of the year.
He predicted values will hit rock bottom in the first quarter, falling to roughly US$1,220 an ounce. However, the metal will recover to US$1,280 by September and end the year at approximately $1,320.
Paul Bloxham, chief economist for HSBC Australia and New Zealand, said a rebound in the US economy was having a drag effect on gold prices.
“If the US dollar is looking stronger, then it pushes the US dollar value of gold prices down but also the US economy is showing some clear signs about being on the road to recovery means investors are more willing to put their money in the US and often they shift out of safe havens like gold,” he explained.
However, Mr Bloxham remained confident about gold and could see why wealthy individuals are queuing up to invest in bullion. He said that while the US appears to be enjoying an economic revival, the European market continues to have significant problems in a number of countries.
The European Central Bank has interest rates at near-zero and the financial institution may begin a bond-buying program, which could cause worried investors to move towards gold.
