Agoracom

Leading gold expert and chief executive of GFMS Paul Walker says the gold price could run for another twelve to eighteen months and exceed $1,000/ounce again, but he believes there is a growing downside risk in a 24-month timeframe.

Speaking on the Moneyweb/Mineweb Power Hour radio show, Walker said that after seven years of a gold bull-market run, the gold price was reaching a "mature area". The gold rally started around 2001 with an investment drive into gold that built up over the years, but there are now different signs that the broader economic backdrop is starting to turn a little away from gold.

"And there are also signs to suggest there are definitely tensions within the market, and that suggests a growing downside risk probably again in a 24-month timeframe," Walker said.

"We are still bullish, but I think one can start...the end-game."

Walker said he hadn't expected the gold price to drop from $975/ounce in July to the mid $750s/ounce as he thought the downside was $830 or $840/ounce.

There was still good appetite for gold on the price dips, but the question that comes to mind is when does a shift in the expectational element occur and what has driven the market to its current point?

Walker said it was important to remember that investment has been the driver behind this; the broader based private investment, high net worth individuals, family offices and the like. That has benignly set into rising expectations in various markets, which in turn created a positive feedback loop that has strengthened over the last six or seven years.

"And one has to ask the question of what happens if investors stay away from the market for a period of time, a long period of time, and worse yet, what happens if they turn negative? If you look at the supply-demand balances we need investors just to keep the price at $800 or $900."

The selling that occurred in the last month pushed the price down and this was compounded by liquidity draining out of the market. "So you do start to again get a feel for what the downside risks are going forward," said Walker.

However, he expects gold to reach $1,000/ounce again before the end of the year based on developments in the macroeconomic environment "where there are still many things that could go wrong".

"I have been saying that we are seeing temporary drops in the gold price, albeit lower than I would have anticipated."

"So $1,000/ounce quite easily."