10 July 2012 - Gold Prices May Peak in 2013

Gold price forecasts for 2011 through 2013 were recently reduced by troubled French Bank, BNP Paribas, following the recent volatility in gold price valuations. In the near term, a further correction in the gold price may be warranted with physical gold sales and investment redemptions being realized to offset losses in other asset classes. Over a medium to longer term investment horizon, Precious Metals Research Analyst Anne-Laure Tremblay remains optimistic, “We see the gold price peaking in 2013, as the market starts to anticipate monetary tightening in the United States, but do not expect a sharp fall thereafter.”  BNP Paribas reduced its near term outlook on gold prices to average $1,730 per troy ounce in the fourth quarter, down from its earlier estimate of $2,170 per troy ounce and further reducing its target 2012 gold price forecast to $1,950 per troy ounce.

Investment demand may continue

Precious metals consultancy GFMS has suggested that central banks could obtain approximately 500 tonnes of gold by the end of December, which raised its forecast almost 49 percent from 336 tonnes last month. In reviewing the results of a recent survey, Global Head of Metals Analytics, Philip Klapwijk indicated, “We are seeing central banks now operating very much on the buy side of the market. The selling we had seen from Europe has dried up and that’s left those buyers of choice really the only active players in the market. And that has led to central bank demand now becoming another important pillar for the advance of gold prices. We have seen names such as Mexico, South Korea coming into the market on the buy side and I would not be surprised if we see some further new names in the future.”
During a recent interview on BNN, Credit Suisse Head of Commodities Research, Rick Devereaux supported a strengthening of gold prices, “the western economies in particular are going to be weak for some time. There will be continued concerns about the banks and the financial system, my guess is that for some time gold [prices] continues to trend higher, so in our forecasts we have it going up for at least the next year and maybe two.”

Spot market gold price movement

The spot market gold price fell slightly to the range of $1668.10 per troy ounce, as a confluence of weaker US equity markets and disappointing economic data from China and lower sentiment created a movement to strengthening of the dollar. Investors will note the potential of market volatility with several market moving announcements including the retail sales number from September, consumer sentiment, business inventories and import and export price reports all expected on Friday.
Silver prices declined to $31.65 per troy ounce, a reduction of 2.8 percent, moving in tandem with a broader base metal complex as platinum fell 1.3 percent to a range of $1,523.75 per troy ounce. Palladium contracted to $597.47 per troy ounce which is equivalent to a 1.2 percent drop from its previous trading session after having earlier experienced a correction to its lowest valuation in nearly 2 years.


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