Tuesday, June 18, 2013

‘Paradigm shift’ to send gold sliding to $1,200 an ounce

Gold has tumbled further and faster than even the bears at Societe Generale thought in April, leading the bank on Monday to cut its year-end forecast for the yellow metal.
In a fresh note, analysts led by commodities-research chief Michael Haigh penciled in a a drop to $1,200 an ounce by Dec. 31, down from their April 2 call of $1,375 — a call that was made when gold GCQ3 -0.82%– now changing hands near $1,382 — was trading closer to $1,600. They write:

We believe that the dramatic gold sell-off in April, combined with the prospect of the Fed starting to taper its QE programme before year-end, has resulted in a paradigm shift in many investors’ attitude towards gold, which is likely to result in continued large-scale gold ETF selling this year and next. ETF gold selling has averaged about 100 tonnes per month since the April sell-off. We expect continued ETF selling to exceed higher demand for jewellery/bars and coins. Therefore, we have revised lower our Q4 13 gold forecast to $1,200/oz.
That implies another 13.2% drop in gold prices. Through Friday, the front-month gold contract had slumped 17.2% this year.
–William L. Watts

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