Gold seen at highest annual price for five years in 2018: GFMS

LONDON (Reuters) - Gold in 2018 will deliver its strongest annual price performance in five years, GFMS analysts forecast on Tuesday, as political uncertainty drives investment in bars and bullion-backed investment funds.

The GFMS metals research team, a unit of Thomson Reuters, predicted gold would average $1,360 an ounce this year, up 8 percent from 2017, with some short-term moves towards $1,500.

Gold has not risen above that level since early 2013.

“Uncertainty revolving around President (Donald) Trump’s politics, along with ongoing tensions in the Middle East and Brexit negotiations will remain gold’s key drivers,” the team said as it released its Gold Survey 2018.

The team expected demand by exchange traded funds (ETFs) to rebound this year to 350 tonnes.

“Retail investment is forecast to rise in 2018 following four consecutive years of declines, thanks to a pick-up in bar demand, supported by improving sentiment towards gold and rising price expectations,” GFMS said.

Adding to the bullish picture, the Chinese central bank was expected to resume purchases, GFMS said, leading to a rise in net official sector demand this year to more than 400 tonnes for the first time since 2015.

The Chinese central bank, once a major buyer of gold, has not reported any additions to its reserves since October 2016.

ETF demand totaled 177 tonnes last year, GFMS said, while physical gold demand, including buying of jewelry, coins and bars, rose 10 percent, its first annual increase since 2013.

That was driven by a 13 percent climb in jewelry fabrication, its first annual rise since 2013, with demand in the world’s second largest consumer India particularly strong before the implementation of a new tax regime mid-year.

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