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Gold Prices Headed Lower, But Not Yet – BNP Paribas

By Kitco News
Thursday March 12, 2015 10:44 AM

(Kitco News) - Although BNP Paribas expects gold’s downward trend to continue, it has pushed back lower forecasts to later in the year, when they expect the U.S. Federal Reserve to make its first move on rates.

“We have pushed back our expectation of an acceleration of the decline in the gold price from Q2’15 to Q3’15 to coincide with our anticipated timing of the first rate hike by the Fed,” said Harry Tchilinguirian, head of commodity market strategy, and Stephen Briggs, senior metals strategist, for the French bank, in a report published Thursday.

“Although the U.S. is now at the NAIRU [non-accelerating inflation rate of unemployment] level of employment, core inflation, the Fed’s preferred measure, remains weak. If this were to persist, the Fed may have to postpone a first rate hike from June (the market consensus) to September,” they added.

The analysts noted that future Fed policy remains high on gold’s agenda and it will “continue to dictate the pace at which the USD appreciates” and consequently, the rate at which gold demand declines.

The U.S. dollar index saw a corrective pullback Thursday morning after hitting a 12-year high overnight.

However, the analysts remained firm on gold prices inevitably heading lower this year, maybe even hitting sub-$1000 levels.

“We now see gold averaging $1160/oz (+$130/oz revision) in 2015 and have introduced a forecast for 2016 of $975/oz,” they said.

They added that risk reversal is pricing puts above calls, which suggests a negative price bias for the yellow metal.

Commenting on gold’s strength earlier this year, the analysts argued that the “Jan-Feb rally was an exceptional event” and is unlikely to be repeated.

By Sarah Benali of Kitco News sbenali@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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