​Gold demand to double, by 2030

Increasing gold demand in Asia is likely to see a revival of the metal; however it won’t hit these new highs until 2030.

Demand is slated to spike to 5000 tonnes a year by 2030 according to ANZ analysts, with the price to increase up to US$2400 per ounce, Bloomberg reports.

However despite a brighter outlook ahead, the current situation remains stressed.

According to IBISWorld research the price of gold will rise again, however, stabilising above current rates and "is expected to increase in 2014/15 to an average of US$1411 per troy ounce as the global economy improves and inflationary pressures ease with higher interest rates in the United States and Europe".

However this is having a flow on effect for the aforementioned gold producers, who will see their profit slashed in the wake of this price righting combined with the increased cost of actual production.

"Overall industry profit is estimated to have decreased from 12.6 per cent of industry revenue in 2009/10 to 8.7 per cent in 2014/15," IBISWorld stated.

It went on to forecast these rates to decline even further over the next five years "with higher costs contributing to profit declining to a forecast 7.6 per cent of revenue in 2019/20".

The head of precious metals at the Bank of Nova Scotia told Reuters the market is vulnerable, adding that it is unlikely to increase soon, and will continue on a similar trajectory throughout the year.

Unfortunately for many miners current prices sit below their production costs.

CEO of brokerage firm Maison Placements Canada, John Ing, told Bloomberg that this situation is creating a new two tier market, with top tier companies operating good assets with lower costs, while others are saddled with low grade, high costs assets that began during the boom times for gold.

This is creating a new crisis point for the industry, as according to Fidelity Select Gold, up to a third of worldwide output will be pushed into a cash-flow negative position now gold has fallen below the US$1250 mark.

Speaking to Grant Thornton's Brock Mackenzie a new cost per ounce matrix is being developed, with the likelihood that if prices fall below US$1100 per ounce Standards & Poor will begin looking at credit ratings.

"The reality was that many companies were chasing production without focusing on their costs as prices were still too high to support this action, but while the price of gold increased gold stocks themselves underperformed massively," he said.

"At this US$1100 per ounce mark a lot of mines will become very marginal operations, so they are likely to close and supply will diminish and we will see likely see an upwards movement in price again, although it does depend on the US dollar."

IBISWorld has forecast next year to be the first for revenue growth in the gold sector since 2011/12, with the 2015/16 period seeing a 1.8 per cent increase, after the 2.4 per cent decline expected for the 2014/15 period.

Following that the sector is predicted to grow at a rate of 2.3 per cent the following year, and then 3.5 per cent for the 2017/19 financial year, before once more entering a period of decline as an era of consolidation takes hold and more mergers and acquisitions are seen in the market.

Looking further ahead, ANZ is predicting increased demand from China and India.

“The bedrock, the anchor of our views of increasing demand for physical gold will come from rising incomes in Asia,” Warren Hogan, ANZ chief economist, told Bloomberg.

“Gold is going to have that investment role and it’s going to become more prominent.”

This will be built by an increased demand for gold jewellery, and the purchasing of bullion as a safe haven as people “continue to channel savings into gold for cultural reasons”, ANZ’s recent report stated.

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