Gold May Hit $2,500 in 3 Years as Banks Buy, Newmont Says

The author of this article believes that gold may rise to $2,500 an ounce in three years as many investors continue to buy the metal as a hedge against inflation. Demand from central banks on price dips is also helping boost prices. Gold has risen for 11 straight years and experts are predicting $2,300 by the end of the year.

By Liezel Hill
Sep 26, 2012 8:01 AM MT
Bloomberg

Gold may rise to $2,500 an ounce in three years as investors buy the metal as a hedge against inflation, said Richard O’Brien, chief executive officer of Newmont Mining Corp. (NEM), the second-biggest producer by sales.

Demand from central banks on price dips will probably help create a floor for gold prices at around $1,600, O’Brien, 58, said in a phone interview yesterday from Las Vegas, where he’s attending the MINExpo conference.

“The downside is fairly limited,” the CEO of the Greenwood Village, Colorado-based company said. “If we see some economic growth we could see $2,500 in the next three or four years.” A global economic recession would be negative for all commodities, including gold, O’Brien said.

Gold has risen for 11 straight years, reaching a record $1,923.70 an ounce on Sept. 6, 2011, in New York as investors add to holdings using exchange-traded products and central banks expand reserves. O’Brien said in September 2011 that gold may reach $2,000 an ounce by the end of that year and $2,300 by the end of 2012.

Central banks and the International Monetary Fund were the largest bullion owners with 29,500 metric tons at the end of last year, or 17 percent of all mined metal, World Gold Council data show. O’Brien said central banks will probably purchase at least 450 tons of gold next year as they buy the metal to diversify reserves and protect against inflation.

Central banks bought 254.2 tons in the first half of 2012 and may add almost 500 tons for the full year, the London-based World Gold Council said last month.

Kazakh Reserves

Kazakhstan expanded its gold reserves for a 13th consecutive month in August, buying 1.4 metric tons, data on the IMF’s website showed. South Korea bought 16 tons in July, and Paraguay purchased 7.5 tons that month, the data show.

Gold for December delivery fell 1 percent to $1,748.70 at 9:59 a.m. on the Comex in New York. Gold futures have risen 11 percent this year. The metal will average $1,772 in 2013, $1,652 in 2014 and $1,540 in 2015, according to the median of analysts’ estimates compiled by Bloomberg.

“We are just in the middle of what will continue to be a very bull market for gold coming into the future,” O’Brien said in a Sept. 24 speech at the Las Vegas conference. The metal is trading “more like a currency than like a commodity.”

Barrick Gold Corp. (ABX), based in Toronto, is the biggest gold producer.

To contact the reporter on this story: Liezel Hill in Toronto at lhill30@bloomberg.net

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net

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