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Gold May Reach $5,000 by 2020, Standard Chartered Says

Gold Prices May Reach $5,000 by 2020, Standard Chartered
This year’s rally for bullion has been spurred by safe-haven buying as the European debt crisis escalated and inflation accelerated in emerging markets. Photographer: Chris Ratcliffe/Bloomberg

Gold prices, which rose to a record above $1,600 today, may soar to as high as $5,000 an ounce by 2020 on slowing production growth and increasing demand from China and India, according to Standard Chartered Plc.

“We are looking for the gold price to reach about $2,000 by 2014,” said Yan Chen, Hong Kong-based head of metals and mining for Standard Chartered. “There’s a chance that the gold price can be as high as $5,000 by 2020” as incomes in China and India rise, he said in an interview on Bloomberg Television’s “On the Move Asia” today.

This year’s rally for bullion has been spurred by safe-haven buying as the European debt crisis escalated and inflation accelerated in emerging markets. Immediate-delivery gold gained as much as $6.55, or 0.4 percent, to $1,600.10 an ounce and traded at $1,596.88 by 8:26 a.m. in London. Spot gold, which has gained 12 percent in 2011, traded at $1,597.32 in Singapore.

Gold prices extended the rally to an 11th day, the longest streak of gains since July 1980, as President Barack Obama reached out to lawmakers in both parties over the weekend in search of a deficit-cutting deal as the Aug. 2 deadline for raising the U.S. debt ceiling looms.

European leaders are holding a special summit this week as they seek to contain the region’s debt crisis, after eight of the region’s banks failed stress tests and European Central Bank President Jean-Claude Trichet reiterated the ECB won’t accept as collateral bonds from a nation that defaults.

China Demand

Gold demand in China, the world’s largest producer, is expected to continue rising as economic growth boosts wealth and inflation rising at the fastest pace in three years drives demand for alternative assets. China’s consumer prices jumped 6.4 percent in June, exceeding the government’s full-year target of 4 percent.

The nation’s gross domestic product expanded 9.5 percent in the second quarter, the statistics bureau said on July 13, compared with the median 9.3 percent estimate in a Bloomberg News survey of 18 economists. China is also cutting taxes and raising minimum wages as part of efforts to spur consumption and reduce the nation’s wealth gap.

In India, record investment demand for gold will keep climbing as higher incomes spur buying, Reliance Capital Asset Management Ltd. said July 13. Gold demand in India reached a record 963.1 tons in 2010, according to the World Gold Council.

Marc Faber, publisher of the Gloom, Boom & Doom report, said June 23 that he plans to continue buying gold even though it’s likely to decline over the next three months. Dennis Gartman, the economist and editor of the Gartman Letter who correctly forecast 2008’s commodities slump, said July 12 he’s cutting his euro-denominated gold holdings as “too many people have joined the trade.”

Slowing Output

Gold production will grow 3.6 percent annually in the next few years, Standard Chartered’s Chen said. The analyst has had an “outperform” rating for Hong Kong-listed shares of Zhaojin Mining Industry Co., a gold producer, since April 15, 2009, according to data compiled by Bloomberg. The shares have risen threefold since then, compared with a 39 percent gain for the Hang Seng Index.

“The gold market will be in deficit in the next couple of years,” he said. “The central banks are now back buying gold massively, turning from net seller of gold into net buyer.”

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