A senior bank economist says it is unlikely Australian equity markets will see gold spike at around US$1000 per ounce - but it is also unlikely the metal will fall to historic lows.
Addressing the 2007 Paydirt Australian Gold Conference in Perth today, Westpac Institutional Bank economist, Mr Huw McKay, described the outlook for the gold price as "benign".
"The pricing in real terms will not be charging up to the US$1,000 benchmark but at the same time, it also will not be diving below US$500 on any sustainable basis so it is better to be part of a weaker uptrend than a price downtrend," Mr McKay said.
"Gold has tended over time to replicate the trend in base metals prices but to a degree, it can be expected to underperform against base metals in the medium term.
"The urbanisation and infrastructure demands of the surging China and Indian economies - where we have forecast double digit growth for some years - will have a very positive impact on base metals prices.
"These price trends indirectly set the limits on the gold price but we do expect gold to do better in the short-term as base metals prices have a lot of froth in their pricing at present.
"When that froth comes off, probably around 2009, gold will be quite resilient to that trend."
