Gold price prediction: Merrill Lynch cuts 2013 gold prediction

March 6 2013

Merrill Lynch reduced its 2013 average price prediction for gold by 6.9% to $1,680 a troy ounce and its 2014 prediction 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.

The bank cut its prediction on gold prices for 2013 and 2014, citing improving economic conditions and a rise inU.S.nominal rates.

“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 inU.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.

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

Gold price prediction

Gold price prediction


Comments are closed.