GFMS CEO Walker Says Gold Could Dip in 2 Years

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There is still upside in the gold price over the next two years, but the current bull phase will end in the medium term, says GFMS.

There is still upside in the gold price over the next two years, but the current bull phase will end in the medium term, says GFMS.

GFMS CEO Paul Walker said Monday at the Mining Indaba in Cape Town that gold price movements were not only a function of the US dollar, but the yellow metal had its own dynamics of macro supply and demand factors. He said the surge in the gold price as was not only a "dollar story" as the metal has rallied in every economic currency, including the yen and the Euro. Although the dollar was an important factor in the gold price, the surge across currencies suggested that "something else" was driving the metal higher.

The key factor driving gold investor demand was imbalances in the US economy, such as the subprime crises, that changed investor attitude towards gold.

Walker said if a recession in the United States did take place, the commodity complex as a whole could see weaker prices, but gold and probably platinum group metals would "decouple" to sustain high prices. "Our view is that the US will go into recession and that it will have knock-on effects of one to two percent of lower growth in India and China. This would in turn have knock-on effects on big commodity prices." However, this occurrence would at the same time make the case for gold stronger.

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