RESEARCH AND ANALYSIS
Thomson Reuters GFMS said Thursday that it looks for gold to climb back to the mid-$1,800s before the end of the year (reports Allen Sykora of Kitco News).
If so, the consultancy said, this would mean yet another higher annual average price of gold, continuing what is already an 11-year run. However, the firm also said it looks for an improved macroeconomic backdrop to eventually trigger a bear market.
Thomson Reuters GFMS released its forecast while launching its Gold Survey 2013 at events in London and Johannesburg.
The report said that U.S. developments will remain a key factor driving gold price movements over the course of 2013. While improving but still patchy economic data contributed to a softening of the gold price in recent months, the consultancy said it feels this is already is already priced into the market. Meanwhile, there is a continued lack of confidence that ongoing debate over budget cuts and raising the debt ceiling will result in a satisfactory and timely resolution.
“Gold is likely to remain very sensitive to U.S. monetary policy, and even though we’ve had some hawkish noise from some within the Fed, it’s difficult to see a material unwinding of the QE (quantitative easing) program until well into 2014 and so that should continue to underpin the gold price in 2013,” said Neil Meader, head of precious metals research and forecasts at Thomson Reuters GFMS.
The report also expects ongoing support for gold from developments in Europe. Much of the continent’s economic outlook is largely priced into the market, but there “remains significant potential for gold-friendly shocks,” as reflected by a price uptick in mid-March as the financial crisis unfolded in Cyprus, the consultancy said.
Other supportive factors cited include a continued low interest-rate environment and some investors’ fears over the potential for inflation to become resurgent.
However, Thomson Reuters GFMS did offer caution for further into the future. “There’s arguably clearer light at the end of the tunnel in that we can perceive a return to something more like normality for the macro-economic backdrop, and that could easily entail the start of a secular bear market, perhaps in late 2013 or more probably in 2014,” Meader said.
Read the full story on Kitco News.