Dubai: Gold prices are likely to climb to reach over $1,500 an ounce by 2016, according to experts.

Given the soaring demand for gold after prices dropped to a 20-month low on Friday, prices may jump to $2,000 an ounce by 2016, according to a report by Merrill Lynch Global Research, published on Tuesday.

“I wouldn’t be surprised,” said Pradeep Unni, senior relationship manager at Dubai-based Richcomm Global Services.

“With prices now below $1,500/oz, we expect a pick-up in jewellery demand in the medium term…as such, we believe the downside to gold prices may be limited to an additional $150/oz,” stated the report.

Sajith Kumar, CEO and director at JRG International and IBMC group, expects gold prices will be on an upward trend in the next three years. He expects prices to stand between $1,250 to $1,550 an ounce by 2014, and between $1,200 to $1,450 by 2015. By 2016, he expects gold prices to stabilize, standing between $1,100 to $1,500 an ounce.

“From 2015 and onwards, when the Eurozone recovers, diversity in equity markets will rise. And by 2015, new mining and production of gold will start, so the availability of gold will rise and the demand will drop. By 2016, the gold mining production will be cut down, and the price of gold will stabilise, due to the support of the central banks and the US presidential elections,” Kumar said.

With the falling market for gold prices, investors continue to buy gold. However, Kumar says in 2016, when gold prices stabilise, investors should “go for short-term investments.”

The report suggested that investors will need to buy 600 tonnes of gold to sustain $2,000 per ounce, compared to 1,798 tonnes for non-commercial purchases in 2012.

“The corrections in gold prices in the last few days and the selling of gold by central banks are not indicative of change in the value of gold. Even if markets underperform, investors will still buy. Demand for gold is still there,” said Unni.

Gold prices have been fluctuating in the last few weeks. On Saturday, spot gold prices dropped to $1,501.40 per troy ounce, a decline of more than 20 per cent from $1,921.41. By Monday, the yellow metal dropped as much as 6.3 per cent to stand at $1,384.69 an ounce.

 

Sarah Algethami is a trainee at Gulf News