Sharp increases in mining costs mean gold prices will need to reach $3000 per ounce by 2017 for the industry to stay in profit, World Gold Council chief executive Aram Shishmanian said on Monday.<\/p>\n
Miners currently needed a gold price of $1300 to survive, Shishmanian said, but faced steep rises in mining costs, along with the cost of dividends and host nation taxes.<\/p>\n
“If this continues for the next five years the gold price needs to be at least $3000 just to stay in the business,” he said. However, he was optimistic sustained demand would drive prices higher over the long term.<\/p>\n
Spot gold fell to a four-and-a-half month low of $1,556.5 an ounce on Monday on concerns over the European debt crisis. Normally a refuge for investors in times of economic turmoil, gold has recently traded in line with risk assets like base metals and stocks.<\/p>\n
Future demand would come from emerging markets, central banks and investors, Shishmanian said, noting that China and India now represent 55 percent of the world gold market.<\/p>\n
“Emerging markets are going to hold increasing amounts of gold reserves,” Shishmanian said. “Holding billions of dollars doesn’t help them. The alternative potentially is gold.”<\/p>\n
Exchange traded funds backed by gold currently hold $120 billion, he said.<\/p>\n
“This is the tip of the iceberg,” he said. “US pension funds do not hold substantial amounts of gold but we see that changing over the next 20 years.”<\/p>\n
An upturn in the gold price is likely once current Greek turmoil crystalises, says World Gold Council investment MD Marcus Grubb.<\/p>\n
Current global macroeconomic concern is seen as a contributing factor to gold\u2019s gradual fall since the end of February, when US Federal Reserve chairperson Ben Bernanke revealed that there would be no more quantitative easing in the near term in the US, which also led to a sharp fall in equities.<\/p>\n
\u201cIt\u2019s not a gold phenomenon. We\u2019re basically seeing investors raising cash weightings again as the international economic picture begins to look deeply concerning again. There are also rumours of more bank rating downgrades to come,\u201d said Grubb.<\/p>\n<\/p>\n