Gold prices could rise to $2,000 an ounce in 2012, according to the predictions of the latest Thomson Reuters GFMS survey and GFMS Ltd's CEO Philip Klapwijk.
Gold is currently trading at $1,655 an ounce.
Klapwijk cited four reasons to be bullish on gold in 2012.
Gold Bars and Coins
We're now seeing significant demand for gold particularly in bar form, in coin form. And that demand is occurring not just in Europe and North America but also here in Asia, Klapwijk told Reuters Insider.
We're seeing strong demand for gold jewelry, 22-karat jewelry for example in India, 24-karat jewelry in China, said Klapwijk.
Central banks now operating very much on the buy side of the market. The selling we had seen from Europe has dried up and that's left those buyers of choice really the only active players in the market, said Klapwijk.
If we look at the totality of demand, mine production is actually falling short of global demand for gold, said Klapwijk.
What happens beyond 2012 and 2013 will largely depend on the status of major fiat currencies (e.g. U.S. dollar, euro) around the world.
A major reason gold prices soared in the first place was the declining faith in fiat currencies due to loose monetary policies and ballooning public debts.
If these problems are resolved and faith in major fiat currencies are restored, gold prices will likely fall, said Neil Meader, research director at Thomson Reuters GFMS, according to The Globe and Mail.
Meader thinks one overt trigger for this trend could be a series of interest rate hikes from central banks around the world.
Then again, faith in the soundness of major fiat currencies may not be restored.
If we...see inflation starting to worry people not perhaps just in China or India but also in Western countries, then we could well have a situation where gold goes viral, said Klapwijk.