Credit Suisse warns of quantum rise in gold price

Credit Suisse is warning that supply and demand factors “could trigger a quantum upward change in the gold price”.

David Davis, a research analyst at the bank, has reported that “Our studies indicate that the dynamics surrounding the gold supply and demand have begun to change inexorably towards a diminishing supply of gold and increasing investment demand, which will ultimately impact the gold price.”

The prediction is based on the assumption that “long term global gold production will begin to decline as the diminishing number of new reserves fail to compensate for dying mines”.

The report also takes into account the impact of cost increases on marginal mines, asserting that these could cause premature closure.

Mr Davis believes that the decline in the gold supply could be accelerated “should the gold mining industry continue to incur significant year-on-year inflation rates which are not offset by similar or significantly higher gold price increases year-on-year”.

In addition, sales of gold by central banks are likely to fall and the banks could become net buyers of the metal.

The bank has published the findings in it most recent “Gold Note” in which it details the factors changing the current supply dynamics and triggering an upward pressure on the gold price.