Gold will rebound from its two-year low and rally as much as 27 percent by December as skepticism over the global recovery increases demand, according to billionaire Indian jeweler T.S. Kalyanaraman.
Bullion, which lost 15 percent this year as it plunged into a bear market, will advance to $1,800 an ounce, Kalyanaraman, chairman of Kalyan Jewellers, said in an e-mailed response. The metal hasn’t traded at that level since November 2011.
Gold slumped by the most since 1983 on April 15, prompting shoppers in India, the world’s biggest consumer, to advance plans to buy wedding jewelry, while retail sales tripled in China. Europe’s debt concerns and a weaker dollar may reignite demand for gold among investors, according to Dominic Schnider, head of commodities research at UBS AG’s wealth-management unit.
“Investors, specially fund managers, will start collecting gold since they have got an excellent price range to move their funds,” said Kalyanaraman, whose closely-held Thrissur, Kerala-based Kalyan Jewellers is valued at about $1 billion, according to the Bloomberg Billionaires Index. “The domestic market has picked up strongly and there is huge demand.”
Gold, which rallied as much as 2.6 percent to $1,426.05 an ounce today, may climb to $1,550 within six months on physical and investment demand, Mark Pervan, global head of commodity strategy at Australia & New Zealand Banking Group Ltd., said in a note today. Still, Barclays Plc said that bullion may be among the weakest commodity performers over the next few years.
A rush by Indian consumers to buy gold jewelry and coins after the slump will boost imports this quarter as traders and banks run out of stockpiles, Mohit Kamboj, president of the Bombay Bullion Association Ltd., said yesterday.
In India, demand during recent days was the most this year, the All India Gems & Jewellery Trade Federation said. Gold is bought during festivals and marriages, with the main festival season from August to October followed by the wedding season from November to December and late March through early May.
India’s overseas purchases may jump 36 percent to 305 metric tons in the three months ending June from 225 tons a year earlier, Kamboj said. Imports may climb as much as 20 percent this month from year earlier, he said.
Gold for immediate delivery, which declined to $1,321.95 on April 16, traded at $1,416.39 at 3:34 p.m. in Singapore. This month’s drop brings gold closer to the global average production cost of about $1,200 an ounce, according to Nomura Holdings Inc.
“The miners who supply the gold have a break even of about $1,250, below which they may not supply,” Kalyanaraman, 65, said.
Producers face closing mines or shutting themselves down after the slump made about 15 percent of miners unprofitable. Barrick Gold Corp. and Newmont Mining Corp., the two largest producers, are among companies in the FTSE Gold Mines Index that have collectively lost about $169 billion in market value since bullion peaked in 2011.
Goldman Sachs Group Inc.’s Jeffrey Currie on April 10 issued a sell recommendation on gold, before the metal plunged. The bank’s 12-month forecast is for $1,390 an ounce. The target for the end of 2014 is $1,270 and prices may drop below $1,200 temporarily, Currie said.
More than $1 trillion has been erased from the value of equities worldwide this week as concern deepened that the global recovery was weakening. Finance ministers from around the world gather in Washington this week to discuss policies to support the economy and strengthen financial systems.
“There is still a recession and market skepticism about it internationally,” said Kalyanaraman. “And gold is the traditional fund where investments are parked in such an environment.”