Gold Price Forecasts Give Mixed Outlook

THE price of gold could climb higher this year, but will struggle to get above $2000 an ounce, according to the gold price forecasts of several leading precious metals analysts.

Swiss investment bank UBS last week cut its forecast for this year's average Gold Price to $1680 per ounce. At the start of this year, UBS's announced a gold price forecast of $2050.

"The view that the US economic recovery is looking more sustainable is becoming increasingly accepted," said a note from UBS analysts including Edel Tully, who won last year's London Bullion Market Association competition for the most accurate gold price forecast.

"Gold is at risk, for it needs persistent inflows of investor money to keep it on its upward trajectory."

Bank of America Merrill Lynch meantime cut its gold forecast this week – from a 2012 average of $1850 an ounce to $1750 an ounce – although it maintained that gold could set a new record high within a year.

"The likely deceleration of US growth, a potentially pro-active Federal Reserve and continued negative real interest rates in a host of nations suggest we are on track to reach our $2,000/oz price target in the next 12 months," said the bank's metals strategist Michael Widmer.

Goldman Sachs analysts also cited a deterioration in the US economic outlook when they reiterated a gold price forecast significantly above current levels last week.

"We believe that the macro environment is likely to soften in second quarter with few near-term upside catalysts other than increased tensions in the Middle East," said a note from Goldman, which maintained its 12-month forecast of $1940 per ounce.

"Our economists forecast subdued growth and further easing by the Fed in 2012." 

"We still favor gold," agreed South Africa's Standard Bank this week in its Quarterly Preview.

"We see $1,630 and $1,600 as good levels to establish a long position for a move higher. Physical demand for gold in Asia is strong below $1,650."

The bank was less optimistic about the prospects for Silver Prices.

"We believe that silver will struggle to sustain rallies above $35/oz," it said.

"We see value below $30/oz."

Analysts at fellow South African institution Investec Wealth Management also sees value in gold.

"It's difficult to determine an exact fair value for gold but we think it’s not unrealistic to see it averaging around $1,850 this year...it's the number we're using in our models," Daniel Sacks, Cape Town-based precious metals analyst at Investec Asset Management, said this week.

"Gold is truly a currency so to determine its value you need to look at what other currencies are likely to do...Because we're in a world where everyone is trying to debase their currencies by printing money, it stands to reason that the supply of other currencies will grow faster than the supply of new gold. That will be supportive of the Gold Price going forward."

Sacks added that the macroeconomic factors underpinning Investec's gold price forecast are likely to continue.

"The conditions that have been in place over the last few years are still there and that should continue to be supportive of gold," said Sacks.

"We're bullish on gold and believe investors should continue to hold it."

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