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BNP Paribas: Safe-Haven Demand For Gold 'Not What It Used To Be'

By Kitco News
Friday August 29, 2014 8:46 AM

(Kitco News) - Safe-haven demand for gold is “not what it used to be,” with the precious metal getting only temporary boosts from geopolitical tensions but at risk of a decline when U.S. interest rates start to rise, said BNP Paribas Friday.

The bank released a revised outlook, updating its average 2014 forecast upward by $10 to $1,265 an ounce but lowering its 2015 forecast by $35 to $1,030.

The bank noted that gold prices currently just below $1,300 an ounce are not far from where they were when BNP Paribas listed its last gold forecast back in mid-May.

“While geopolitical uncertainty has come and gone with events in Iraq adding to those between Russia and Ukraine, gold appears to be showing diminished sensitivity to such developments,” BNP Paribas said. “With safe-haven demand in the doldrums, any price moves above $1300/oz have been opportunities to sell gold, and we see no reason why this will change going forward.”

Meanwhile, the bank said U.S. interest rates will ultimately rise as unemployment declines and growth in gross domestic product picks up momentum.

“As yields ultimately revert higher, gold will become increasingly a less attractive investment,” BNP Paribas said. “In contrast, the ECB is faced with stagnating eurozone economic growth and speculation around eventual QE (quantitative easing) being implemented on top of recent liquidity measures. These divergent trends favor a stronger USD over the EUR and thus represent an additional headwind for the gold price.”

The bank said it sees geopolitical tensions providing “bumps in an otherwise downward trend.”

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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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