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Gold Market Close To A Pullback, Time To Take Profits – CIBC
By Kitco NewsTuesday March 11, 2014 12:26 PM
(Kitco News) - As gold prices have risen more than 11% during 2014 and flirted with the a key level of $1,350 an ounce, CIBC World Markets thinks it may be a good time to grab profits before prices drop.
“We believe the current gold price rally is a bounce and that we could see a pullback,” the analyst wrote in a research note published Tuesday.
The bank analysts pointed out that at the start of the year they were calling for gold to hit an average price of $1,350 an ounce in 2014. At the time of their initial call, the yellow metal was trading around $1,205 an ounce.
To be able to hit their annual average target, the analysts said that gold would have to hit $1,500 an ounce, which is still a possibility, just not within the first part of the year. They said it’s “too early to push gold higher, we think.”
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As of 12:15 p.m. EDT, Comex April gold futures were trading at $1,341.50, flat on the day.
In the near-term, the analysts added that gold could probably hit $1,425 an ounce, but the risks are increasing for a pullback.
“Indications are that the bounce is not quite done yet, but the risk-reward tradeoff does not look that great to us anymore,” the analysts said in the report. “We believe the gold price is currently supported by physical buying and geopolitical tension, but we believe that an improving global U.S. economy ultimately implies rising real rates and possibly more physical selling, both of which is negative for gold.”
Looking at the mining industry, the analysts reiterated that investors should continue to look for companies that have low-cost production growth and low debt levels.
“Although the gold companies are in much better shape following the restructuring in 2013, the companies are by no means out of the woods and printing cash yet. Gold price downside to, say, $1,200/oz. could see these stocks again re-rate downwards, with (more than) 25% equity downside a real possibility, in our view,” they wrote.
By Neils Christensen of Kitco News; nchristensen@kitco.com
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