EIU Commodity Price Forecasts

The latest forecasts for commodities prices from the Economist Intelligence Unit. Below is an excerpt of our latest commodities analysis. For more please visit: gfs.eiu.com

EIU commodities focus: Gold soars amid global capital market turmoil (17th August 2011)

Notwithstanding some volatility, gold prices rose steadily in the first seven months of 2011, rising from around US$1,400/troy oz at the end of 2010 to around US$1,620/troy oz at the end of July. However, in early August prices soared, rising above US$1,700/troy oz, with investor buying intensifying amid turmoil in the global capital markets, fuelled by anxiety over European and US sovereign debt issues, ongoing political crises in the MENA region, and global inflationary pressures. Investor demand—both physical and speculative—is set to continue to support gold prices during the remainder of 2011, as investors seek a "safe haven" in an environment of low (or more often negative) real interest rates and economic uncertainty. Prices could continue to rise in the very near term, but we believe that by the end of the year prices will start to ease slightly, although they will remain at historical highs. Given that we now expect more prolonged economic uncertainty, we have revised up our price forecast for this year to US$1,550/troy oz (previously US$1,440/troy oz). Prices are expected to remain strong in the first half of 2012, before the prospect of monetary tightening and some locking in of profits by investors leads to weaker prices in the second half of the year. By 2013 tighter global monetary conditions will lead to a more marked fall in gold prices.