This year will likely be a year of consolidation for gold and silver prices, with the gold price possibly going as low as $1,100/oz, precious metals consultancy Metals Focus said Wednesday.
"Following a poor 2013, this year's start suggests that attitudes towards gold and silver, among mainstream investors, have been shifting away from the one-sided selling seen in 2013 to a more balanced perspective," the consultancy said in its Gold & Silver Mining Focus 2014 report.
"We believe the high for the year is already behind us, while on the downside, further price weakness from current levels is possible," the report said. "For gold, we would therefore not rule out a brief drop to around $1,100[/oz]. It is a broadly similar picture for silver, in part governed by gold's moves, and so we expect the full year average to fall just short of $20[/oz]."
No average forecast was given for gold.
Metals Focus believes that gold mine supply is expected to rise in 2014.
"However, post-2014, the outlook appears more uncertain. As such, from 2015, gold production could enter a period of secular decline. In contrast, the forecast for silver supply is more positive, with further gains expected until 2016 at least, albeit at a slower pace than in recent years," the report said.
Global gold and silver mine supply continued to rise in 2013, with both metals achieving new highs of 96.7 million oz, a 4% year-on-year increase, and 818.1 million oz, a 5% year-on-year hike, respectively, the consultants' data showed.
Looking at costs of production, "total gold cash costs rose by just 2% on year to $750/oz, while on the all-in sustaining metric, costs fell by 3%, to $1,018/oz. The cost of producing an ounce of silver fell on all metrics. Total cash costs dropped by 2% to $9.17/oz, while on an all-in sustaining basis they fell by 8% to $15.14/oz."
Metals Focus expects gold mine cost inflation to remain contained this year, as producers continue to focus on streamlining their assets.
"Gold demand is estimated to have grown by 17% to 157.9 million oz in 2013. Overall, therefore, the gold market recorded its first structural deficit of substance in many years. This year, another drop in recycling should see total supply ease further back," the report added.
"On the demand side, although physical demand is likely to moderate in many key consuming markets this year, we expect overall volumes to remain at elevated levels. As such, the gold market is projected to record another structural deficit in 2014, providing some support for prices for the rest of the year," the report concluded.
Gold fixed Tuesday afternoon at $1,306.25/oz from a January 2 afternoon fix of $1,225/oz.
