Gold demand in Asia is set to double by 2030 and boost prices to a record as investment and jewelry purchases climb, according to Australia & New Zealand Banking Group Ltd.
Demand from retail and institutional investors will jump to almost 5,000 metric tons a year by 2030 from 2,500 tons, analysts including Warren Hogan and Victor Thianpiriya said in a report. Prices may rise to more than $2,000 an ounce by 2025 and to $2,400 by 2030, they said. The bank says it supplied more than 20 percent of China’s gold imports last year.
Bullion is trading near the lowest level since 2010 and last year posted the first back-to-back annual drop in 14 years as assets in exchange-traded products contracted, the dollar strengthened and U.S. equities surged. Demand in India and China, the world’s biggest buyers, will total 900 tons to 1,000 tons each this year and central banks will buy at least 400 tons, according to the World Gold Council.
“The bedrock, the anchor of our views of increasing demand for physical gold will come from rising incomes in Asia,” Hogan, chief economist at ANZ, said by phone from Sydney on Wednesday. “Gold is going to have that investment role and it’s going to become more prominent.”
While the bank has a short-term target of $1,100, prices will increase through 2030 on growing wealth in Asia, rising investment by money managers and expanding holdings at emerging-market central banks, the bank said. If China’s shift to a more open economy is bumpy and global financial instability continues, the price may surge to $3,230, it said.
Gold for immediate delivery was at $1,147.32 at 9:22 a.m. in London on Wednesday. Prices climbed to a record $1,921.17 in 2011 and fell to a four-year low of $1,132.16 in November.
Rising incomes in Asia will increase gold demand as people purchase more jewelry and continue to channel savings into gold for cultural reasons, according to the ANZ report.
Bullion demand may also expand as aging investors boost holdings in defensive assets and the development of Asia’s financial systems increases funds under management, Hogan said. Central banks may add to holdings to diversify reserves and shore up confidence in newly floated currencies, he said.
Governments globally added 477.2 tons to reserves in 2014, the second-biggest increase in 50 years, according to the London-based World Gold Council. Central banks have increased reserves for the past five years, a reversal from two decades of selling since the late 1980s.
ANZ’s forecasts include China, India, Indonesia, Japan, South Korea, Malaysia, the Philippines, Singapore, Thailand and Vietnam. The bank says it handled the equivalent of 12 percent of global primary production last year, making it one of the world’s biggest physical gold distributors.