He goes on to state that "since the relevance of gold in an industrial context is very limited (as opposed to copper or oil), the price depends much more crucially on the status of the financial sector (in the short run)."
In its conclusions, the report quotes a number of factors which support a continuing rise in the gold price with the supply/demand balance unlikely to improve in the medium term - the only potentially adverse scenarios in this case being a dramatic decrease in gold imports in India, which is considered unlikely, or a very fast increase in mine production - which again, on data available, also looks to be unlikely.
Factors seen as positive for gold include a continued fall in primary production, increased demand from Central Banks in the emerging markets and a long term increase in jewellery demand also from emerging markets as earnings and living standards increase. The gap between supply and demand is thus likely to widen progressively and can't in reality be closed by recycling and Central Bank sales.
On the politico-economic front, the Bank feels that the "massive loss of trust on the capital markets and the still smouldering dangers from inflation" means that the "crisis-proof" metal should remain in strong demand over the coming months, with gold and precious metals seen as the only asset class capable of retaining value in both inflationary and deflationary settings on a sustainable basis.
Mined production of gold seems unlikely to increase significantly as mining companies are finding it increasingly hard to maintain profitability despite the big price increases of the past few years. The increased revenues as a result seem to be being more than matched by corresponding increases in the costs of labour, energy, equipment and production costs. Furthermore with most easily mineable reserves of gold at or nearing exhaustion the cost of working less accessible and lower grade reserves is also having a substantial impact on supply potential. Mining costs of up to around $600 an ounce, and rising, also serve to underpin the potential gold price downside.