Analysts raise their gold and silver price forecasts

Analysts raised their price forecasts for gold and silver last week, according to a biannual Reuters survey of precious metals analysts. Those surveyed attributed this to developed nations’ debt problems, steadily growing demand for gold and silver from developing countries and their central banks, and the continuously lax monetary policy of the US Federal Reserve.

More than half of the analysts participating in the Reuters survey expect the average gold price to quote at $1,500 per ounce or more until the end of 2011. In contrast, the last survey conducted in January found most analysts far less optimistic about gold prices – with just one in five analysts then expecting the gold price to reach $1,500. Since then, however, it has become more and more apparent that the economic problems facing numerous countries around the world are boosting the demand for precious metals – not least owing to European and American sovereign debt woes, and escalating inflation in Asia.

This year’s average gold price forecast was raised to $1,510 per ounce. In contrast, the January survey showed that analysts expected the average gold price to only reach $1,453 per ounce. Analysts expect the average gold price to quote at $1,575 in 2012. Though more cautious with the silver price owing to its greater volatility, they have raised this year´s average price forecast for the white metal to $36.60 per ounce from their previous estimate of $30. The average silver price is expected to be at $36.25 per ounce in 2012, while the January forecast saw silver only trading around $28.

Central bank gold buying is giving an important boost to the gold market. Central banks turned into net buyers of the yellow metal in 2010 for the first time in two decades. From June 2008 to June 2011, these institutions added more than 900 tonnes of gold to their reserves, according to the World Gold Council. In contrast, central banks´ gold reserves declined by 1,284 tonnes between mid-2005 and 2008. Central bank buying will likely support higher prices in the years ahead.