Gold price 2014 forecasts slashed as analysts line up to declare 'Decline & Fall'

Dec 04, 2013 05:31 GMT   Source:Scrap Monster

04 Dec 2013 Last updated at 00:04:22 GMT

LONDON (Scrap Monster): Gold price losses of $30 per ounce in yesterday's trade were trimmed in Asia and London on Tuesday morning, with a brief rally to $1226.
 
World stock markets fell after Wall Street retreated from record highs on Monday.
 
The gold price in Euros dropped through €900 per ounce for the first time since July 2010.
 
Silver failed to match the gold price rally, hitting a new 5-month low of $19.09 per ounce. 
 
"The wheels seem to be coming off the gold market," says one US broker's note.
 
Noting the gold price drop of 25% in 2013, "The yellow metal is at stake of losing its grip in the run-up to year-end," says a separate note from a London market-maker's trading desk.
 
"Our flow is dominated by sellers across the board. Producers, funds, [high-net worth individuals] and ETFs all are selling gold in anticipation of the Fed tapering as early as Dec. 18."
 
Maintaining their holdings even as the gold price fell 2.6% on Monday, the two largest US exchange-traded gold trust funds have so far shed one third of the gold bullion backing their shares in 2013, shrinking to the smallest level since Feb.2009.
 
"We have no doubt that gold is in a bear market," says the commodities team at Swiss investment bank Credit Suisse, repeating the view it first gave in February's 'End of an Era' report.
 
"Financial bubbles tend to unwind faster than they inflate," the bank's analysts write in Gold: Decline & Fall.
 
"If the gold price were to continue to retreat along its current trajectory, the metal would be trading close to $900 per ounce by the end of 2014."
 
"Regardless of the precise timing," agrees French bank and London bullion market maker Societe Generale, forecasting an average gold price of $1050 in the final 3 months of 2014, "underpinning our negative view towards gold is that the ultraloose stance of monetary policy is gradually unwound."
 
Swiss investment bank and London market maker UBS yesterday cut its average 2014 gold price forecast to $1200 per ounce from $1325, also pointing to the much-expected tightening of US monetary policy.
 
A gold price drop to $1050 could signal a "decent buying level", says UBS analyst Joni Teves. But while "physical buyers are expected to provide some support at the lower levels, this is unlikely to be enough to fully offset the selling."
 
"Strong Chinese gold imports are being overpowered," agrees Bart Melek at TD Securities in Toronto, "by sharply lower ETF demand."
 
The Canadian bank's analyst also cites "worries expressed by highly leveraged speculative investors that the 14,700 tonnes of vaulted gold since 2002 may start hitting the market once real Treasury [bond interest] rates move materially higher."
 
Latest data from US regulator the CFTC yesterday showed speculative traders such as hedge funds raising their bearish betting on the gold price to a 4-month high in the week-ending last Tuesday.
 
Net of those bearish bets, the so-called "Large Speculators" net bullish position in gold futures and options fell to 162 tonnes equivalent.
 
That compares to the 3-year average of 497 tonnes.
 
Smaller speculators trading gold on leverage through futures and options meantime cut their net bullishness last week to just 6 tonnes equivalent – the lowest level since early July's negative reading.
 
The gold price was then half-way through a 21% rally from 3-year lows in US Dollar terms.
 
Private investors choosing to trade physical gold, in contrast, last month maintained their positive sentiment near a 6-month high says Bloomberg today, citing the latest Gold Investor Index from BullionVault.
 
Amongst money managers, however, "Gold ETF holdings have failed to stabilise" after the spring collapse says Barclays.
 
"Not really an attractive asset class at this stage," said Mark Konyn, CEO of Cathay Conning Asset Management – part of the $83 billion Conning group – to CNBC overnight.
 
Noting the drop in India's formerly world-leading demand as anti-import rules hit in 2013, "The [investment] case for gold is an inflation hedge," says Konyn. "But where's the inflation globally?"

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