No Shortage of Gold Buyers

"Never before in history have so many investors,[...] spent so much money buying so much gold over such an extended period of time," the study says.

High investment buying should continue this year, the report says, but the tonnage of gold actually purchased will depend on how investors see the world. Political crises, oil supply worries and the prospects for the dollar are all vital factors.

The authors think such anxieties ultimately will be somewhat reduced, which explains why they're projecting a drop of investment buying of almost 9% for the year, to 39.7 million ounces. They do note that demand can turn on a dime, which means the total for this year could be much higher or lower.

Looking forward there are some concerns, notably the burgeoning inventories of gold in market centers such as London and Dubai.

"Some of it appears to represent metal that is being bought by bullion dealers [without] ready buyers eager to acquire them," the report states. "It reflects a risk to future gold prices," if they are dumped onto the open market.

Longer term, the authors warn of increasing mine supply in the years ahead, with "a gold rush of unprecedented proportions" under way around the globe, and estimates of new annual production totals rising at least 14 million ounces a year by 2011, or more than 10% of current yearly output.

With that supply coming on line it looks likely prices will eventually soften to an equilibrium level at around $350 to $400, "barring extreme levels of investment demand or central bank selling," the report states.

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