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Thomson Reuters GFMS: Gold Could Be Entering Several-Year Bear Market

By Kitco News
Thursday June 27, 2013 11:38 AM

(Kitco News) -Thomson Reuters GFMS said Thursday that it is “neutral to cautiously positive” on gold for the second half of 2013, but nevertheless also said the sell-off during the second quarter might have started a multi-year bear market.

The widely followed London-based metals consultancy said it expects the 2013 average price to remain above $1,400 ounce and for gold to trade in a range of around $1,100 to 1,400 next year. The firm issued the price outlook in conjunction with the release of its Italian language edition of the Gold Survey 2013 in Rome.

The firm pointed out that the price decline and changes to institutional investors’ activity since mid-April has led to downward revisions of price forecasts across the industry.

“Although many of the core positive arguments for a strong gold price remain in place, the list of negative factors for gold has grown in recent months, not least growing investor disillusionment, and this sets the scene for what could develop into a multi-year bear market for gold, an occurrence that earlier this year we had only forecast to emerge in 2014,” said William Tankard, research director at Thomson Reuters GFMS.

“That said, from what now represents a heavily oversold position in late June, we stand neutral to cautiously positive on the price in the second half of the year, with risks to the upside based around a possible re-ignition of the dormant eurozone sovereign debt crisis, renewed uncertainty in the United States over the debt ceiling debate, a slowdown in the equity market and indeed a delay of the tapering to the Fed’s quantitative easing measures.” 

Tankard commented that the pullback in price would likely start to bring about decreasing supply of gold, principally through a moderation of scrap flows, along with improvements in fabrication demand, especially in a number of price-sensitive jewelry markets. 

“The changing dynamics of supply and demand under a lower pricing environment for gold will in turn place a less of an onus on the investment sector, the call upon which has grown substantially in recent years in order to absorb the large market surpluses that have prevailed,” he said.

By Allen Sykora of Kitco News; asykora@kitco.com

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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