CPM's 2007 Gold Yearbook report predicted investors would add another 39.7 million ounces to their gold holdings in 2007, after investing 43.5 million ounces in 2006.
The report said 2005 investment demand grew by 46.7 million ounces, compared with average annual net purchases of 9.2 million ounces of gold investment from 1950 to 2000.
"Investors around the world continue to buy large volumes of gold in bullion, coin, and jewelry form. The amount of gold that may be purchased may decline from 2006 levels during 2007, but the overall pace of investment demand is expected to remain very high by historical standards," CPM's annual report said.
CPM said the rush of investors into gold remains the single most important factor in determining the price of gold.
Overall, investors bought 241.5 million ounces of gold between 2001 and 2006, nearly one-quarter of the 1,044.9 million ounces that investors are estimated to own collectively around the world, New York-based CPM said.
Since 2006, the report said, private investors have held more gold than central banks.
CPM's report said central bank gold sales, declined sharply in 2006.
"CPM Group's analysis has suggested for years that central bank gold sales would fall sharply beginning in the middle of this decade, as many central banks that have been reducing their gold holdings during the past quarter century complete the sales of the gold they wished to sell," it said.
The increase in gold prices has contributed to changes in gold's supply/demand trend, the report said.
Whereas mine production had been forecast to expand in 2006, it declined by 2.4 percent instead to 61.4 million ounces because of production problems, the firm added.
Problems at a large mine in Indonesia was largely responsible for the drop in total mine production, although output also was lower in major producing nations from South Africa to Australia, Canada, and the U.S.
Production in other countries, from Peru to Tanzania, continues to expand, as new mines are developed in response to higher gold prices, it added.
On the demand side, CPM said the high gold price dented 2006 fabricated gold product use by 11.2 percent and jewelry demand by 13.3 percent.
It added that non-jewelry gold use in fabricated products rose in 2006 and should grow further in 2007. Those uses, including electronics, dental alloys, and medical devices, are less price elastic, it said. Jewelry demand, however, is price sensitive and declines when prices increase sharply.
Gold has risen from $256.60 an ounce in early 2001 to $721.50 last May. Prices have since dropped off that high. Spot gold was quoted at $643.60 an ounce late Wednesday.
In 2007, gold rose to a high of $689.80 on February 26, reflecting the economic, financial, and political uncertainties over the past six years, the report said.
