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OUTLOOK 2013: Analysts' Gold Forecasts

Friday December 21, 2012 11:58 AM

(Kitco News) - A number of analysts shared their outlooks on gold in 2013 with Kitco News. Following is a compilation of their views on price action and factors they see as most likely to impact the market.

Barclays Capital

Barclays looks for gold to average $1,815 an ounce in 2013 and says it retains a “positive view,” although the bank in mid-December lowered its prior forecast of $1,860.

As 2012 winds down, the bank cited some divergence among market participants. Gold holdings of exchange-traded funds remained around record highs, showing interest from long-term investors. Coin sales also picked up late in the year. However, tactical short-term traders cut their net-long positioning.

“We think speculative positioning predominantly reflects the lack of conviction in gold as we approach year-end,” Barclays said. “However, in our view, a number of positive macro catalysts still exist that could support a move higher in prices. Beyond the (Federal Reserve) balance sheet expansion, uncertainly still lingers over the U.S. fiscal cliff and debt ceiling, while our economists continue to expect Spain to request a precautionary program.”

BNP Paribas

Gold could hit a record high in 2013 due soft monetary policy, less tail risk related to a breakup of the eurozone and ongoing support from physical demand, said BNP Paribas. The bank forecast an average of $1,865 in 2013.
BNP Paribas economists look for global economic growth to rebound to 3.4% year-on-year next year from 3.1% in 2012. Still, economies “are not yet out of the woods,” meaning potential for more monetary accommodation, BNP said.
“After that, the fundamentals of the precious metal will turn progressively more negative, as the market starts to anticipate a withdrawal of monetary easing measures in line with improving economic growth,” BNP Paribas said. “We expect gold to average US$1,780/oz in 2014, the first annual decline in 14 years. The extent of the decline will, however, be limited as gold will continue to attract investor flows thanks to its diversification and safe haven properties.”


Commerzbank looks for gold to at least temporarily exceed $2,000 an ounce in 2013. The bank’s full-year forecast is $1,950.

“Investment demand should profit further from the low and negative real interest rates, for the leading central banks will continue to pursue their ultra-loose monetary policy in 2013 in a bid to shore up the economy and stabilize the financial markets,” Commerzbank said. “For fear of losing purchasing power due to inflation and a devaluation race, investors will increasingly seek refuge in gold as a store of value and alternative currency. Gold ETFs should thus see inflows, while sales of coins and bullion can be expected to gather pace once again.”

Commerzbank said one headwind from 2012 – weaker Indian demand – should abate next year. Buyers in the country should become accustomed to higher prices from increased duties on gold imports and weak rupee, plus the monsoon season is not likely to be as poor as in 2012, which would mean improved rural incomes, the bank said.  Further, an expected economic upturn in China should mean more demand from this nation, while global central banks are likely to remain net buyers, Commerzbank added.

CPM Group

In a mid-December commentary, the consultancy said it anticipates a “downward shift” in prices for a number of commodities in 2013, including gold, silver, oil and some of the base metals. CPM Group cited worries about the strength of the economies in the U.S., China, India, and Europe.

In the case of the U.S., resolution of the fiscal cliff meaning some combination of higher taxes and lower spending could in turn mean disinflationary pressures.

“Gold prices may be weak for an extended period, possibly averaging 1.0% lower in 2013 from 2012 levels,” CPM Group said. “Prices averaged $1,670 this year through Dec. 17, up 6.3% from the similar period a year ago.”

The consultancy also said: “Investors are expected to be more price-sensitive to gold prices in 2013, a theme that began to emerge in the last four months of 2011 and now seems to be firmly entrenched in this market.”

Dillon Gage Metals

Dillon Gage Metals Executive Vice President Roy Friedman is among those who said gold could reach $2,000 an ounce for the first time ever. In a news release from the company, Friedman cited the continuation of global financial problems, still-weak U.S. economy, inability of the government to “agree on much of anything, low interest rates and possible geopolitical problems, such as in the Middle East or Korean Peninsula.

Whenever the economy does pick up, there will be a shift toward expectations for inflation, he continued. “When that happens, precious metals will of course provide a hedge against inflation and will play a significant role in portfolio allocations," he said.
Friedman added: “While the market will remain volatile and sell-offs at times will create anxiety, I expect gold to break above $2,000 in 2013. In fact, a spike to $2,200 would not surprise me."

Global Hunters Securities

Global Hunters Securities looks for gold to surpass $2,000 in 2013 and peak close to $2,300 in 2014. The firm looks for a $1,850 average in 2013 and $1,750 in 2014.

“A wide range of sources of price support seem to be firmly in place, in our view, which should provide sustained support to gold prices,” GHS said. “Gold prices have anticipated various monetary inflation waves since 2008, and we believe these monetary conditions will persist for quite some time. Gold prices may also anticipate a future non-monetary inflationary phase in which consumer prices lift much higher than central bank overnight rates, thus creating another favorable source of price support because of gold's attractiveness during times of higher inflation.”

Meanwhile, as higher prices have eroded jewelry demand, central banks have been adding gold to reserves, GHS said.

GHS cautioned that one risk to its bullish forecast would be a tumble in equities that translates into U.S. dollar strength, GHS said. A muscular greenback tends to pressure gold, and vice-versa.

“If these effects were severe enough, then we believe that gold prices could decline by 20%,” GHS said. “A price correction would not, in our view, change the longer-term direction of gold prices. We believe that the primary trend remains higher.”

Goldman Sachs

The investment bank has said it looks for gold to average $1,810 in 2013 and $1,750 in 2014. In an early-December report, Goldman said it was maintaining a long position although using options for protection against a decline in prices. Goldman at the time put its three-month target at $1,825, but also said it sees growing downside risks and sees gold declining from mid-2013.

Goldman said its economists forecast that the U.S. economic recovery will slow early in 2013 before reaccelerating in the second half, and they also expect additional expansion of the Fed’s balance sheet.

“Near term, the combination of more easing and weaker growth should prove supportive to gold prices,” Goldman said. “Medium term however, the gold outlook is caught between the opposing forces of more Fed easing and a gradual increase in U.S. real rates on better U.S. economic growth. Our expanded modeling suggests that the improving U.S. growth outlook will outweigh further Fed balance sheet expansion and that the cycle in gold prices will likely turn in 2013.”

Still, Goldman said risks to its economic-growth outlook remain “elevated.” But “even under a weaker U.S. recovery than our economists forecast, our modeling still points to only modest upside with gold prices reaching $1,900/toz late in 2013.”

Morgan Stanley

Morgan Stanley listed gold as one of its top commodity picks for 2013, forecasting an average price of $1,853.
The third round of quantitative easing adopted by the Federal Reserve this fall, coupled with the European Central Bank’s commitment to an unlimited bond purchase program, are the most important factors for a continuing weaker trend in the U.S. dollar, and in turn a key to stronger gold prices in the short run, Morgan Stanley said. “However,
low nominal and negative real interest rates, ongoing geopolitical risk in the Middle East and continued mine supply issues are also supportive,” the firm said.

Morgan Stanley also looks for continued support to come from central-bank buying. “Moreover, the Indian jewelry and investment market is also showing signs of recovery as Indian purchasers acclimate to recent price trends amid restocking ahead of the Indian wedding and festival season.” Demand in the country was hurt during 2012 largely by a weaker rupee that made the commodity expensive in the local currency and also due to import duties.


Gold may well continue to consolidate in 2013, as it did in 2012, after setting its record high in September 2011, said Patricia Mohr, vice president with Scotiabank. Gold did not draw much support from the Fed’s announcement of an expansion of its quantitative easing program in December, she said.  Better-than-expected U.S. gross domestic product for the third quarter at 3.1% -- reducing “safe-haven” demand -- triggered a correction on Dec. 20, she added. Scotiabank’s forecast range for the average price of gold in 2013 is $1,700 to $1,750 an ounce.

Societe Generale

Societe Generale looks for quarterly averages of $1,802, $1,800 and $1,850 respectively in the first three quarters of 2013, before slipping towards an average of $1,750 in the final quarter. The bank’s full-year forecast is $1,800.
“The fresh strength is predicated on renewed fears of inflationary forces and currency volatility, while the U.S. dollar is also expected to remain relatively weak on the back of QE3 and the possibility of other monetary tools designed to help offset any headwinds from fiscal consolidation,” the bank said. “That said, we believe that much of these forces are partially priced into the market and that, while investors remain friendly towards gold, they are to some extent positioned accordingly.”

Eventually, however, the bank said, investment appetite is likely to soften whenever confidence in the economy builds, leading to a “gentle” price decline.  “A gradual decline in interest is likely in 2014 and thereafter, but relatively robust jewelry demand, stemming from improved economic conditions, should be able to keep the price fall relatively shallow.”

The bank sees further central-bank buying, although maybe at a less aggressive pace. Also, little hedging activity is expected due to resistance from shareholders and still healthy profit margins, Societe Generale said.

TD Securities

The Federal Reserve’s “steady hand” on monetary accommodation, anticipation that eurozone governments will do what is necessary to stabilize economies, a pickup in China’s economy all should help gold move higher, says TDS. The firm’s average 2013 forecast is $1,895.

“If the U.S. central bank stays its über accommodative course, even as growth is seen to be more solid, many in the market will likely worry that monetary policy may be behind the inflation curve,” TDS said. And this would mean buying of gold as a hedge.

Further, central-bank buying of gold is likely to continue, particularly from “up-and-coming” economies. TDS looks for official-sector purchases of another 525 metric tons or more in 2013.

TDS projected that gold will approach $2,000 an ounce in the latter part of 2013. However, TDS said it anticipates that prices are likely to peak in late 2013 or the first part of 2014, whenever the U.S. yield curve steeps on expectations of a less-dovish Fed.

“So, investors would be wise to look for signs in the real economy for when this is to happen,” TDS said. “A hint: a move to more normal U.S. employment participation rates may be a good place to start.”


“We remain gold bulls,” said UBS, listing an average price forecast of $1,900 for 2013. “Ongoing uncertainty around U.S. fiscal issues, together with the view that major central banks will maintain loose monetary policies for longer, are key supports of our outlook.

“We also expect that the politicians will prevent the U.S. from going over the cliff, with an 11th-hour agreement. A ‘grand bargain’ would not necessarily be negative for gold, given its positive correlation with risk, and its lack of a fiscal premium. A compromise lacking specifics would benefit gold inasmuch as it disappoints those looking for long-run fiscal discipline. Gold’s ‘x-factor’ is a ‘cliff’ resolution that include a lift to the debt ceiling which, in turn, increases the likelihood of ratings agency action, boosting gold's popularity in 2013.”

UBS suggests the possibility of further expansion of the Federal Reserve’s balance sheet has been overlooked. Further, implementation of the European Central Bank’s Outright Monetary Transactions, and further Bank of Japan easing – both expected by UBS -- would also support gold, as would a weaker outlook for the yen, which competes with gold as a flight-to-quality asset.

“While physical demand may remain sluggish, official sector buying will compensate,” UBS 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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