D E C E M B E R / J A N U A R Y 2 0 1 5
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Bloomberg ranked precious metals
forecasters based on the accuracy of their
forecasts for the most recent eight quar-
ters ending in June 2014. The top gold
forecaster was Edel Tully of UBS. His 2015
estimate currently stands at US $1,170/oz
with his 2016 prediction looking only mar-
ginally better at US $1,177/oz.
When we consider the supply side of
the equation, gold mine production is
expected to decline. According to GFMS-
Thomson Reuters, the average all-in cost
of gold production currently stands at US
$1,350/oz. As a result it is expected that
mine production could start contracting
over the next few years. The World Gold
Council (WGC) believes that "while gold
prices can fall below (all-in) production
costs for various reasons, prices below this
level are not sustainable for an extended
period of time."
An SNL Metals & Mining report indi-
cates that gold discoveries made since
1999 might eventually only replace half of
the gold produced over the same period.
This reserve replacement shortfall is com-
pounded by the fact the length of time
from discovery to production is expected
to continue trend higher. This is the
result of numerous factors including more
detailed feasibility work, more exten-
sive social, environmental and permitting
processes, limited availability of capital,
scarcity of experienced personnel and
lower overall grades.
Global gold demand was 964 tonnes in
the second quarter of 2014, significantly
reduced from the record high in the compa-
rable period in 2013. Despite this, demand
outside of the investment arena still remains
strong. Jewelry accounted for 53% of gold's
global demand. A large portion of gold
demand (58%) is linked to consumption
and not negatively affected by higher inter-
est rates, according to the WGC. This part
of demand increases when GDP increases, a
situation that generally coincides with ris-
ing interest rates.
A WGC report highlighted the fact that
a 1% increase in global real GDP increased
gold jewelry and electronic demand each
