The investment markets are yielding to the fact that the global economy will remain weak for the better part of 2009. As a result, investors will continue to seek safe havens. And we believe that safe haven investment demand will drive gold prices during 2009.
Despite a bit of downside in the immediate future, we expect gold to have a stellar year. Global economic turmoil and deflation will, undoubtedly, continue to influence gold prices in the near-term. A short-term pullback in gold prices from current levels to $800—maybe even a bit lower—is not out of the question. However, we expect gold prices to break new records during 2009.
For our current perspective, we expect gold prices to reach as high as $1,300 during 2009, which would be a profit of over 50% from current levels. Gold prices in 2009 will be supported more heavily by supply/demand fundamentals than in the previous years of this gold bull market.
During the third quarter of 2008, world gold demand outstripped supply by 10.5 million ounces. This deficit was worth $8.5 billion and was the largest supply/demand deficit since the gold bull market of the 1970s. Official 4Q 2008 world gold supply/demand figures will be calculated and reported later this month.
In the meantime, though, all estimates suggest that there will be another very large deficit in world gold supplies from the fourth-quarter, with investment demand continuing to drive the market. We expect that a continuing surge in investment demand could push gold prices as high as $1,300 at one point during 2009.
There will likely be a bit more volatility in the gold market in 2009 as more and more speculators come into the market. It is likely that the gold market will experience three or four price peaks (selling points) during 2009. Nevertheless, we expect 2009 to be another great year for gold investors.