Standard Chartered Bank: Big Gold Gains Ahead

June 15th, 2011 by

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Standard Chartered Bank Predicting Big Gains for Gold Prices

Tuesday, June 14, 2011

Research analysts at Standard Chartered Bank are predicting a very strong outlook for gold prices in a just released industry report.  Specifically, the report focuses on three main points.

  1.  Central Banks are now net purchasers of Gold.
  2. Supply growth will be extremely limited, with a base case growth estimate of 3.6%.
  3. Rising household income in China and India

As Gainesville Coins has highlighted in the following piece – Snapshot of Central Bank Gold Reserves – Standard Chartered points out that Central Bank gold selling, which peaked at 674 tons in 2005, have now reversed, with Central Banks buying 129 tons in the first quarter of 2011.  Annualized this represents 517 tons.  This represents a key change in the supply and demand dynamics for the gold market.

Specifically, the report points out that China currently has just 1.8% of its foreign currency reserves in Gold bullion.  “If China were to bring this percentage in-line with the global average of 11%, it would have to buy 6,000 tons of gold, or more than 2 years of global production.”

Second, Standard Chartered points out the extremely low level of growth in supply expected over the coming years.  Highlighting this fact, Standard Chartered identifies only 7 gold mines capable of adding more than 500,000 oz. of gold production between 2011 and 2015.

Finally, the report shows a very compelling correlation between rising household income in China and India to the price of gold.  The rising level of demand this represents, combined with Central Bank buying and weak production growth puts gold prices, according to the analysts, on a continued upward trajectory.

On a final note, the report does highlight the ongoing deterioration of U.S. fiscal policy and record U.S. debt levels as being a support for the more stably perceived value of gold.

The conclusions of the report state that the factors outlined “can potentially drive the gold price to US $5,000/oz.”

An interesting read.  The themes brought up in this report are similar to other bullish scenarios for gold prices put forth by the investment banking community.  Gainesville Coins feel it noteworthy to highlight some of the current thinking among these analysts.

The report in its entirety can be found here : LINK