The gilded outlook for gold

" China and India are already the world’s largest gold consumers so demand will increase as incomes rise in those countries."

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Beyond being the world’s largest producer and consumer of gold ANZ believes China will eventually dominate the price recovery process as Asia’s financial centres open up.

There is no reason why Shanghai should not become a major centre for gold trading provided the appropriate institutional and legal reforms take place.

In the long term central banks are likely to increase gold holdings. Most of the buying will come from emerging-market central banks as they move closer to developed-world levels.

The supply side is also supportive of price as gold mines can’t expand rapidly. Prices below $US1,000 an ounce are unsustainable in the long term.

Gold is a store of wealth in unstable times and while global finance has weathered a decade of storms the future is uncertain. 

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Daniel Hynes is a senior commodities analyst at ANZ