PwC: Gold prices set to peak in 2012
PwC’s gold survey predicts that the price of gold will reach an all time high of USD 2,000 an ounce this year- from a current USD 1,600. Of the mining companies questioned by PwC, 29 percent expect to spend on acquisitions in 2012 and 40 percent are planning to replace reserves via acquisitions. In 2011, there were 544 gold acquisitions with an approximate value of USD 11.2 billion, while 2010 saw 483 acquisitions with a value around USD 18.2 billion. “With the volatility we are seeing in the market, those companies sitting on deep pools of cash and with an appetite for acquisition, are in the driver’s seat. They are ready and able to swoop on smaller explorers who are more vulnerable to market fluctuations and have difficulty raising capital,” said Alexandru Lupea, Partner, Assurance Services, Energy, Utilities and Mining Industry Service Leader, PwC Romania.
Despite high prices, mining companies are not doing as well as might be imagined. Although 62 percent of the respondents to the survey reported a positive impact from gold prices, the effect on the value of their stock was less than expected. Mining companies are attempting to attract investment by starting or increasing dividends paid to shareholders. “We expect gold companies will continue to explore ways to allow investors to get the benefit from the high prices. Gold-linked dividends are only one option; companies could get more creative with their dividend strategies”, said Alexandru Lupea.
National banks around the world are buying more gold in response to volatility in the global economy. Demand is increasing but PwC cautions against a reckless gold buying frenzy. “Given the relatively low amounts of gold available for purchase, countries with substantial foreign currency reserves that wish to diversify away from US dollars must do this gradually, in order to avoid destabilizing the markets,” concluded Lupea.
Liam Lever, liam@romania-insider.com
(photo source: Deutsche Bank)
