(Kitco News) - Citing “investor fatigue,” Barclays lowered its 2013 average gold price forecast to $1,646 an ounce, the firm said on Thursday.
“We have revised lower our gold price forecast, as the downside risks to the outlook have risen while the upside catalysts have receded. There is scope for gold to gain traction, given the forthcoming debt ceiling debate, but investor fatigue has weighed upon prices,” the bank said.
Gold prices are likely to remain in a range, with support coming from physical demand and the low interest rate environment, but the upside is likely to be capped unless the market can find a new catalyst, they said.
Barclays said physical buying, particularly in China, responded to the lower gold prices and is providing solid support.
The biggest risk that gold faces is what exchange-traded fund investors do, Barclays said. ETF investors have sold shares, with outflows reaching 111 metric tons across the physically backed funds.
“There are two indicators that may shed some light on whether outflows will continue. First, the months in which previous hefty net redemptions have materialized correlate with moves below $1,600, suggesting an element of price sensitivity. Second, equity market price action has, on occasion, had a stronger relationship with flows, with the recent rally in equity markets hampering interest in gold,” they said.
By Debbie Carlson of Kitco News firstname.lastname@example.org