VANCOUVER, British Columbia, Oct 29 (Reuters) - Newmont Mining Corp Inc. (NYSE:NEM - News), the world's biggest gold miner, predicted on Wednesday that the gold price would rise further over the next 12 months, helped by flat supply, sturdy demand and further weakness in the U.S. dollar.
"When you look at the entire picture, it continues to be very supportive of the gold price continuing to go up. We still expect the gold price to trend upwards over the next year," Pierre Lassonde, Newmont's president said.
Lassonde has developed a reputation in the gold industry as something of a gold-market sage. But he did not forecast a price level for bullion.
Speaking to analysts on a conference call to discuss the firm's third-quarter results, Lassonde said Newmont's gold price prediction was based on the "80-20 rule".
According to this principle, 20 percent of the value of the gold price is determined by supply and demand, and 80 percent by its relationship to the U.S. dollar.
As the U.S. currency weakens, so the gold price rises, both because it is viewed as a store of value and as bullion, traded in U.S. dollars, becomes cheaper to buy in other currencies.
On the supply side, Lassonde said Newmont expected global gold production to be flat no matter what the gold price did over the next two to three years. This was because it took two to four years to get permits for a mine and a year or two to build it.
"Even though the gold price is continuing to go up we don't see the trend changing at all for the next two years, if not three years, very much like Newmont's own production profile."
Turning to gold demand, Lassonde said a recovery in world economies, currently in progress, was good for bullion consumption. China, right now the demand sponge for base metals, would also play a key role in the bullion market.
"We continue to believe that with deregulation of the gold industry in China we are going to see an increase (in demand) of 300 tonnes to 500 tonnes per year over the next three to five years. That is going to have a very major impact on the gold market," he said.
Lassonde said Newmont expected the greenback to continue to decline especially against Asian currencies. But adjustments would be slow as Asian nations with units pegged to the currency would be loath to decouple from the sagging greenback.
December gold traded on COMEX rose more than $3 to $388.20 on Wednesday. It is near 7-year highs after climbing some 12 percent so far this year.
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