By Francesca Freeman
Bank of America Merrill Lynch Tuesday cut its outlook on gold prices for this year and next,
citing improving economic conditions and a rise in U.S. nominal rates.
The bank reduced its 2013 average price forecast for gold by 6.9% to $1,680 a troy ounce and its 2014 forecast by 9.8% to $1,838/oz. It now doesn't expect gold to break above $2,000/oz until 2014, a turnaround from its previous forecast for a move above $2,000/oz in the second quarter of 2013.
"After a multi-year rally, gold prices have been range-bound for several quarters," said Michael Widmer, Bank of America Merrill Lynch's metals strategist. "In our view, headwinds to gold prices will persist in the near term."
A rise in U.S. nominal rates--which raises the cost of storing gold--is proving a particular drag on investment interest in the metal, said Mr. Widmer. Improving economic conditions also raise doubts over the metal's safe-haven appeal, he added.
"At the same time, sizeable output gaps in many nations have prevented a meaningful pick-up of inflation and inflation expectations in the current recovery phase," said Mr. Widmer.
Gold tends to be sought as a hedge against inflation.
Despite near-term headwinds, several factors could boost gold prices in the longer term, the bank said.
"Most notable, real yields could trend lower in 2014," said Mr. Widmer. "Also, foreign-exchange reserve diversification from emerging market central banks on the back of currency interventions to offset a weaker yen could bring about increased gold buying later this year. Further out, we believe that investors will lose some of their clout on the gold market as emerging countries will become more affluent, which should lead to higher jewellery purchases."
At 0945 GMT, spot gold was trading at $1,580.59/oz in Europe.
http://www.marketwatch.com/story/b-of-a-merrill-lynch-cuts-13-14-gold-forecast-2013-03-05
Bank of America Merrill Lynch Tuesday cut its outlook on gold prices for this year and next,
citing improving economic conditions and a rise in U.S. nominal rates.
The bank reduced its 2013 average price forecast for gold by 6.9% to $1,680 a troy ounce and its 2014 forecast by 9.8% to $1,838/oz. It now doesn't expect gold to break above $2,000/oz until 2014, a turnaround from its previous forecast for a move above $2,000/oz in the second quarter of 2013.
"After a multi-year rally, gold prices have been range-bound for several quarters," said Michael Widmer, Bank of America Merrill Lynch's metals strategist. "In our view, headwinds to gold prices will persist in the near term."
A rise in U.S. nominal rates--which raises the cost of storing gold--is proving a particular drag on investment interest in the metal, said Mr. Widmer. Improving economic conditions also raise doubts over the metal's safe-haven appeal, he added.
"At the same time, sizeable output gaps in many nations have prevented a meaningful pick-up of inflation and inflation expectations in the current recovery phase," said Mr. Widmer.
Gold tends to be sought as a hedge against inflation.
Despite near-term headwinds, several factors could boost gold prices in the longer term, the bank said.
"Most notable, real yields could trend lower in 2014," said Mr. Widmer. "Also, foreign-exchange reserve diversification from emerging market central banks on the back of currency interventions to offset a weaker yen could bring about increased gold buying later this year. Further out, we believe that investors will lose some of their clout on the gold market as emerging countries will become more affluent, which should lead to higher jewellery purchases."
At 0945 GMT, spot gold was trading at $1,580.59/oz in Europe.
http://www.marketwatch.com/story/b-of-a-merrill-lynch-cuts-13-14-gold-forecast-2013-03-05
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