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We believe that in a very short run a bounce is possible, whereas in the medium risks are still on the downside.
What actions, if any, do you anticipate form central banks, taking into consideration that the recent selloff of gold caused huge losses for the banks?
It looks increasingly likely that Cyprus will sell its gold. Whether other European countries will follow, this a difficult question to answer. Certainly, some of the developing countries' central banks are keen to add gold to their reserves at these levels. There is an increasing number of countries, which are either accumulating the precious metal or looking to add at a lower price and then sell it at a higher. I assume that the developing countries will be using this buying opportunity and Sri Lanka was one of those nations, which were seeking to increase its gold reserves. However, we do have to keep an eye on the fact that Cyprus may not be the first and the only European country to act in such a way. This is another precedent that Europe is establishing, and frankly speaking, it is not a good one.
What is your short and long term outlook for gold, and what do you expect to influence gold the most going forward?
To my mind, in the short term gold is going to be slightly higher, cautiously positive; nevertheless, in the medium term it looks negative. Clearly, the main factors, which might significantly influence gold price, are investors' sentiment and central banks' behaviour. If prices were to drop further, there is the risk that we might see producers coming back in to the market and start hedging. On a longer term basis what is important is the situation in the OPEC countries. We think that they have been accumulating gold during the last decade, running huge fiscal surpluses. If oil prices were to remain weak going forward, that would be a significant buyer taken out of the market, and this would be a negative driver on a longer term basis.