Top two gold forecasters stay bearish after 2014 surge
February 18, 2014 12:04 pm
The two most-accurate gold forecasters are holding to their bearish estimates for 2014 even after the metal recorded its best opening to a year since 1983.
Futures rallied 9.7 percent in 2014 through February 14, bouncing back from the largest yearly decline in three decades, and achieved a three-month high. Holdings in exchange-traded goods supported by bullion bolstered by 3.2 metric tons last week, the most since December 2012, after sagging down 869.1 tons last year when prices downgraded 28 percent.
“I just see this as a corrective move,” said Robin Bhar, the head of metals research at Societe Generale SA in London and the most-accurate forecaster tracked by Bloomberg in the past two years. “We would still want to be bearish gold,” said Bhar, who expects a fourth-quarter average of $1,050.
Bullion got a boost this year from reports showing the U.S. wasn’t growing as fast as estimate and as lower prices triggered Asian demand, with coin sales surging from America to Australia. Gold’s best forecasters say the bounce back won’t last because greater financial values will stifle purchases and the Federal Reserve will continue slowing stimulus as the economy strengthens.
The metal will average $1,165 an ounce in the fourth quarter, relinquishing 12 percent from $1,318.60 on February 14, according to the median of nine analyst estimates compiled by Bloomberg. Even after gold surrendered 31 percent from a record $1,923.70 in September 2011, prices are twice the average of 2006.
Not Cheap
“Haven demand plays well when gold is cheap, but it’s no longer cheap,” said Justin Smirk, a senior economist in Sydney at Westpac Banking Corp. and the second most-accurate forecaster tracked by Bloomberg in the past two years. “I’m a little surprised by the volatility in the market, but it really doesn’t change my overall view,” said Smirk, who expects a slide through the year to a fourth-quarter average of $1,020.
The gold rally since December 31 ranked fourth among 24 commodities tracked by the Standard & Poor’s GSCI gauge, which gained 1.2 percent, led by coffee, U.S. natural gas and silver. The MSCI All-Country World Index of equities, which advanced 20 percent in 2013, fell 1.1 percent this year, while the Bloomberg Treasury Bond Index rose 1.6 percent.
Bullion’s gains will “run out of steam” without a “more meaningful shift” in investor sentiment, Suki Cooper, an analyst at Barclays Plc in New York, said in a February 14 note to clients. Goldman Sachs Group Inc. analysts led by Jeffrey Currie, the head of commodities research in New York, said in a February 12 report that gold will “grind lower” as U.S. growth improves, reiterating a forecast for prices to reach $1,050 by the end of the year.
Bullish Bets
Hedge funds and other large speculators more than doubled their bets on higher prices this year, with a net-long position of 69,291 futures and options contracts as of February 11, from a six-year low of 26,774 on December 3, U.S. Commodity Futures Trading Commission data show. The record was 253,653 in August 2011 as prices approached the all-time high in September 2011.
Investors added 1 ton through gold ETPs in February after cutting holdings for 13 consecutive months, data compiled by Bloomberg show. The value of the funds’ assets climbed to $74.2 billion, from $67.9 billion on December 30. There’s about a 50 percent probability that gold has bottomed, Citigroup Inc. said in a February 17 report. U.S. investors are becoming more positive on gold, UBS AG analysts said in a report yesterday after meeting clients.
Standing Pat
Billionaire hedge-fund manager John Paulson, who cut his holding in the SPDR Gold Trust by half in the second quarter, kept his 10.23 million-share stake in the largest gold-backed ETP unchanged for a second straight quarter in the three months ended December 31, filings showed February 14. The stake is valued at about $1.13 billion.
Gold should climb to $1,400 by the end of the year as the outflow from ETPs slows in the second half, Eugen Weinberg, the head of commodity research at Commerzbank AG in Frankfurt, said January 29. He attributed the rebound this year to faltering equity markets and a drop in real interest rates. The yield on 10-year Treasuries fell to 2.7 percent from 3 percent at the end of December, boosting the appeal of gold as an alternative asset.
The rebound helped revive mining shares. Barrick Gold Corp., the largest producer, advanced 20 percent this year to C$22.36 ($20.40) on February 14 in Toronto, after a 46 percent drop in 2013. The Toronto-based company took $11.5 billion of writedowns last year related to lower bullion prices.
Goldcorp Inc. rose 32 percent this year after a 37 percent drop in 2013. The Vancouver-based company said last week it had $443 million of fourth-quarter impairments related to lower gold prices.
Physical Demand
Prices began to rebound last month on signs that physical demand in Asia, the biggest buying region, jumped after gold’s 2013 decline. Consumption in China surged 41 percent last year to a record 1,176.4 tons, the China Gold Association said February 10. The U.K.’s Royal Mint said January 8 it ran out of 2014 Sovereign gold coins, and mints from Australia to the U.S. reported surges in coin sales.
Deutsche Bank AG, in a January 31 report, cited “powerful physical flows” to China and India and prospects of a weaker dollar as being supportive for gold.
“There’s some bargain-hunting coming through,” said Bhar, who has covered metals since 1984. “As gold rallies, you’ll probably see physical demand drying up.”
The prospect of weakening currencies in emerging markets will increase the risk of further declines for gold, “given the price-sensitive nature of jewelry demand in local currency terms,” Goldman said in its report last week. India’s currency, the rupee, lost 12 percent of its value against the dollar in the past 12 months.
Economic Growth
U.S. retail sales in January fell the most since June 2012, and jobless claims unexpectedly rose last week, government data showed. Fed Chair Janet Yellen said on February 11 the recovery in the labor market is “far from complete” and that bond-buying cuts aren’t on a “pre-set course,” a sign the central bank may retain stimulus measures.
Gold jumped 70 percent from December 2008 to June 2011 as the recession eroded global growth and the Fed pumped more than $2 trillion into the financial system and cut interest rates, raising inflation concerns. Through 2012, bullion gained for 12 consecutive years and prices surged as much as sevenfold.
The Fed on January 29 left unchanged its statement that it will probably hold its target interest rate near zero “well past the time” that unemployment falls below 6.5 percent, “especially if projected inflation” remains below the committee’s longer-run goal of 2 percent.
Tame Inflation
Consumer prices rose 1.5 percent, following a 1.7 percent advance in 2012. Inflation will be 1.6 percent this year, a Bloomberg survey of 88 economists showed.
This year’s economic slowdown probably is temporary and reflects the unusually cold winter storms since December, Federal Reserve Bank of Dallas President Richard Fisher said last week. The U.S. had its coldest January since 2001, government weather data show. The Fed should stick to its strategy of gradually reducing bond purchases, Fisher said February 14 in a Bloomberg Radio interview in Dallas with Kathleen Hays and Vonnie Quinn.
The Fed cut its monthly bond-purchasing by $10 billion in each of its past two meetings, leaving purchases at $65 billion, and the central bank “is going to keep on tapering,” Westpac’s Smirk said. Because buying is being reduced slowly, “it’s not such a big shock, so for now, I think the market’s got most of it priced in,” he said.
Other Assets
As long as equities keep rising, investors will take money out of gold and into higher-yielding assets, including stocks and other commodities, Societe Generale’s Bhar said. While the MSCI All-Country World Index of equities is down for the year, the gauge had risen for eight straight sessions through February 14 and was up 5.6 percent from a 16-week low set February 4.
“The acceleration in the U.S. economy is continuing,” Bhar said. “Nothing has really happened in terms of Fed thinking, and therefore the dollar will strengthen and yields will go up. These are still dampeners on the gold price. If the whole world is generally getting back to health, and less tail
risk, you don’t need a safe haven as such.”
The material has been provided by InstaForex Company – www.instaforex.com
The two most-accurate gold forecasters are holding to their bearish estimates for 2014 even after the metal recorded its best opening to a year since 1983.
Futures rallied 9.7 percent in 2014 through February 14, bouncing back from the largest yearly decline in three decades, and achieved a three-month high. Holdings in exchange-traded goods supported by bullion bolstered by 3.2 metric tons last week, the most since December 2012, after sagging down 869.1 tons last year when prices downgraded 28 percent.
“I just see this as a corrective move,” said Robin Bhar, the head of metals research at Societe Generale SA in London and the most-accurate forecaster tracked by Bloomberg in the past two years. “We would still want to be bearish gold,” said Bhar, who expects a fourth-quarter average of $1,050.
Bullion got a boost this year from reports showing the U.S. wasn’t growing as fast as estimate and as lower prices triggered Asian demand, with coin sales surging from America to Australia. Gold’s best forecasters say the bounce back won’t last because greater financial values will stifle purchases and the Federal Reserve will continue slowing stimulus as the economy strengthens.
The metal will average $1,165 an ounce in the fourth quarter, relinquishing 12 percent from $1,318.60 on February 14, according to the median of nine analyst estimates compiled by Bloomberg. Even after gold surrendered 31 percent from a record $1,923.70 in September 2011, prices are twice the average of 2006.
Not Cheap
“Haven demand plays well when gold is cheap, but it’s no longer cheap,” said Justin Smirk, a senior economist in Sydney at Westpac Banking Corp. and the second most-accurate forecaster tracked by Bloomberg in the past two years. “I’m a little surprised by the volatility in the market, but it really doesn’t change my overall view,” said Smirk, who expects a slide through the year to a fourth-quarter average of $1,020.
The gold rally since December 31 ranked fourth among 24 commodities tracked by the Standard & Poor’s GSCI gauge, which gained 1.2 percent, led by coffee, U.S. natural gas and silver. The MSCI All-Country World Index of equities, which advanced 20 percent in 2013, fell 1.1 percent this year, while the Bloomberg Treasury Bond Index rose 1.6 percent.
Bullion’s gains will “run out of steam” without a “more meaningful shift” in investor sentiment, Suki Cooper, an analyst at Barclays Plc in New York, said in a February 14 note to clients. Goldman Sachs Group Inc. analysts led by Jeffrey Currie, the head of commodities research in New York, said in a February 12 report that gold will “grind lower” as U.S. growth improves, reiterating a forecast for prices to reach $1,050 by the end of the year.
Bullish Bets
Hedge funds and other large speculators more than doubled their bets on higher prices this year, with a net-long position of 69,291 futures and options contracts as of February 11, from a six-year low of 26,774 on December 3, U.S. Commodity Futures Trading Commission data show. The record was 253,653 in August 2011 as prices approached the all-time high in September 2011.
Investors added 1 ton through gold ETPs in February after cutting holdings for 13 consecutive months, data compiled by Bloomberg show. The value of the funds’ assets climbed to $74.2 billion, from $67.9 billion on December 30. There’s about a 50 percent probability that gold has bottomed, Citigroup Inc. said in a February 17 report. U.S. investors are becoming more positive on gold, UBS AG analysts said in a report yesterday after meeting clients.
Standing Pat
Billionaire hedge-fund manager John Paulson, who cut his holding in the SPDR Gold Trust by half in the second quarter, kept his 10.23 million-share stake in the largest gold-backed ETP unchanged for a second straight quarter in the three months ended December 31, filings showed February 14. The stake is valued at about $1.13 billion.
Gold should climb to $1,400 by the end of the year as the outflow from ETPs slows in the second half, Eugen Weinberg, the head of commodity research at Commerzbank AG in Frankfurt, said January 29. He attributed the rebound this year to faltering equity markets and a drop in real interest rates. The yield on 10-year Treasuries fell to 2.7 percent from 3 percent at the end of December, boosting the appeal of gold as an alternative asset.
The rebound helped revive mining shares. Barrick Gold Corp., the largest producer, advanced 20 percent this year to C$22.36 ($20.40) on February 14 in Toronto, after a 46 percent drop in 2013. The Toronto-based company took $11.5 billion of writedowns last year related to lower bullion prices.
Goldcorp Inc. rose 32 percent this year after a 37 percent drop in 2013. The Vancouver-based company said last week it had $443 million of fourth-quarter impairments related to lower gold prices.
Physical Demand
Prices began to rebound last month on signs that physical demand in Asia, the biggest buying region, jumped after gold’s 2013 decline. Consumption in China surged 41 percent last year to a record 1,176.4 tons, the China Gold Association said February 10. The U.K.’s Royal Mint said January 8 it ran out of 2014 Sovereign gold coins, and mints from Australia to the U.S. reported surges in coin sales.
Deutsche Bank AG, in a January 31 report, cited “powerful physical flows” to China and India and prospects of a weaker dollar as being supportive for gold.
“There’s some bargain-hunting coming through,” said Bhar, who has covered metals since 1984. “As gold rallies, you’ll probably see physical demand drying up.”
The prospect of weakening currencies in emerging markets will increase the risk of further declines for gold, “given the price-sensitive nature of jewelry demand in local currency terms,” Goldman said in its report last week. India’s currency, the rupee, lost 12 percent of its value against the dollar in the past 12 months.
Economic Growth
U.S. retail sales in January fell the most since June 2012, and jobless claims unexpectedly rose last week, government data showed. Fed Chair Janet Yellen said on February 11 the recovery in the labor market is “far from complete” and that bond-buying cuts aren’t on a “pre-set course,” a sign the central bank may retain stimulus measures.
Gold jumped 70 percent from December 2008 to June 2011 as the recession eroded global growth and the Fed pumped more than $2 trillion into the financial system and cut interest rates, raising inflation concerns. Through 2012, bullion gained for 12 consecutive years and prices surged as much as sevenfold.
The Fed on January 29 left unchanged its statement that it will probably hold its target interest rate near zero “well past the time” that unemployment falls below 6.5 percent, “especially if projected inflation” remains below the committee’s longer-run goal of 2 percent.
Tame Inflation
Consumer prices rose 1.5 percent, following a 1.7 percent advance in 2012. Inflation will be 1.6 percent this year, a Bloomberg survey of 88 economists showed.
This year’s economic slowdown probably is temporary and reflects the unusually cold winter storms since December, Federal Reserve Bank of Dallas President Richard Fisher said last week. The U.S. had its coldest January since 2001, government weather data show. The Fed should stick to its strategy of gradually reducing bond purchases, Fisher said February 14 in a Bloomberg Radio interview in Dallas with Kathleen Hays and Vonnie Quinn.
The Fed cut its monthly bond-purchasing by $10 billion in each of its past two meetings, leaving purchases at $65 billion, and the central bank “is going to keep on tapering,” Westpac’s Smirk said. Because buying is being reduced slowly, “it’s not such a big shock, so for now, I think the market’s got most of it priced in,” he said.
Other Assets
As long as equities keep rising, investors will take money out of gold and into higher-yielding assets, including stocks and other commodities, Societe Generale’s Bhar said. While the MSCI All-Country World Index of equities is down for the year, the gauge had risen for eight straight sessions through February 14 and was up 5.6 percent from a 16-week low set February 4.
“The acceleration in the U.S. economy is continuing,” Bhar said. “Nothing has really happened in terms of Fed thinking, and therefore the dollar will strengthen and yields will go up. These are still dampeners on the gold price. If the whole world is generally getting back to health, and less tail
risk, you don’t need a safe haven as such.”
The material has been provided by InstaForex Company – www.instaforex.com
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