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23 April 2024

Gold slips to $1,625: Dubai analyst sees ‘blood on the street’

By Vicky Kapur

Spot gold price slipped to $1,625.25 a troy ounce during the last session of the week on Friday before recovering to close at $1,656 per ounce.

India is warning its citizens, the world’s largest consumers of the yellow metal, to go on a crash-diet as far as gold consumption is concerned, or the government will make it more expensive for them to put gold on the table.

“Demand for gold must be moderated,” Finance Minister P. Chidambaram insisted last week. In a subtle yet stanch warning to the country’s citizens, he said that barring a self-imposed diet, the only other alternative for the government would be to add punishing taxes to gold rate to dampen the demand.

“We may be left with no choice but to make it a little more expensive to import gold. The matter is under government consideration,” Chidambaram told reporters referring to the adverse impact of gold import on India’s high current account deficit.

As analysts clamour to downsize their gold forecasts for 2013, the yellow metal is charting an unpredictable path, to say the least.

But first the spot news: Last week saw gold yo-yo like a headless chicken, rallying to touch $1,695/oz on the upper side before sinking to $1,625 and then levelling off at $1,656 – virtually unchanged from the previous week’s close of $1,655.

As Dubai gold expert Gerhard Schubert, Head of Precious Metals at Emirates NBD bank, says in his latest weekly report, “a lot of ‘blood on the street’ has been spilled in this sell-off, which saw large position liquidations and the re-emergence of the more fundamental gold bears.”

He adds: “The reaction of the market, after the release of the minutes from the Federal Open Market Committee (FOMC), had an extremely sobering effect. The question remains if market participants really expected this money printing to go on forever and ever.”

The big question, then, is where is gold headed from here and, perhaps more importantly from an investor’s perspective, where might it end 2013?

Before we list the 2013 forecasts, here’s a disclaimer: Investors will do well to take investment decisions after careful deliberations and discussing their individual outlooks with professional analysts. Emirates 24/7 makes no claim as to the accuracy or authenticity of the forecasts, and accepts no liability or responsibility to any person or organisation as a consequence of any reliance upon the information below.

That out of the way, below is Emirates 24/7’s pick of investment banks’ 2013 forecast for the yellow metal:

Emirates NBD’s Schubert, for one, is still holding on to his earlier forecast despite the recent developments. “There have been quite a few houses that have very recently reviewed and reduced their price outlook for gold. I am still looking fundamentally at the same issues discussed over the recent past and nothing significant has occurred, at least not as of yet, which would change my still positive price outlook for 2013,” he wrote in his report.

HSBC Bank, on the other hand, has just lowered its gold price forecast for 2013. “We estimate a wide $1,575/oz to $1,950/oz trading range for 2013 and expect the market to remain volatile,” the bank said this morning.

“We are lowering our average gold price forecasts for 2013 to $1,760/oz from $1,850/oz after factoring in the 2012 year-end price of $1,675/oz, and leaving our 2014 forecast of $1,775/oz unchanged. We are introducing a 2015 forecast of $1,675/oz and leaving our long-term forecast of $1,500/oz unchanged,” the bank said in its revised forecast published on Sunday.

Commerzbank remains a gold bull, and sees the metal piercing the magical $2,000/oz-mark in 2013. The bank’s full-year average forecast is $1,950/oz, clearly at the upper limit of most other forecasts.

Goldman Sachs, the investment bank, expects gold to average $1,810/oz in 2013 and $1,750/oz in 2014.

BNP Paribas too has a bullish forecast for gold, and believes that the yellow metal could hit a record high in 2013 due to a variety of factors, including loose US and Euro Zone monetary policies, and a revival of emerging markets demand. The bank forecasts an average of $1,865 in 2013, and $1,780/oz in 2014.

Barclays Capital expects gold to average $1,815/oz an ounce in 2013 (down from an earlier prediction of $1,860/oz), and says it retains a “positive view.”

Morgan Stanley too remains a gold bull – at least for 2013. The investment bank has listed gold as one of its top commodity picks for 2013, forecasting an average price of $1,853/oz.

Société Générale’s full-year average forecast is $1,800/z. However, the European bank also gives a quarterly forecast for the yellow metal – $1,802 in Q1, $1,800 in Q2 and $1,850 in Q3, but reckons that gold will lose its shine in Q4 and slip to $1,750/oz in the final quarter.

UBS is also among the self-proclaimed gold bulls. The investment bank lists an average price forecast of $1,900/oz for 2013.