Gold 'may be near a peak'

Feb 12, 2011 10:43 PM | By Jana Marais 

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The big question at the Mining Indaba was who will be the new buyers, writes Jana Marais

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Gold may be "running into some headwind" as investors increasingly turn to other investment assets. While uncertainties in the global economy - such as the impact on China's economy of monetary tightening - can support the gold price or even lead to further rises, the message at this week's Mining Indaba was that gold may be close to peaking.

Uncertainties driving the gold price include high unemployment and a poorly performing housing market in the US, but these are not new themes. Hedge fund proprietors John Paulson and George Soros have acted and bought gold. "The question is who will be the new buyers?" said Tom Kendall, an analyst at Credit Suisse.

Another analyst agreed. "Our house view is that the fundamentals are still pointing towards higher prices for precious metals," the analyst said.

"In gold, however, I think we're starting to run into some headwind. Other than the recent crisis in Egypt, it is difficult to see what the next catalyst is to take us to another price level."

The main possibility is China's government steadily increasing its gold reserves. It bought 450 tons last year. Other countries increasing their reserves include Russia and India. Should China, with massive foreign reserves, increase its bullion reserves aggressively, the price is likely to keep reaching new levels.