The two most-accurate gold forecasters are holding to their bearish forecasts for 2014 even after the metal posted its best start to a year since 1983.
Futures rose 9.7 percent in 2014 through Feb. 14, rebounding from the biggest annual drop in three decades, and reached a three-month high. Holdings in exchange-traded products backed by bullion increased by 3.2 metric tons last week, the most since December 2012, after slumping 869.1 tons last year when prices slid 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 forecast and as lower prices spurred Asian demand, with coin sales rising from America to Australia. Gold’s best forecasters say the rebound won’t last because higher prices 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, down 12 percent from $1,318.60 on Feb. 14, according to the median of nine analyst estimates compiled by Bloomberg. Futures traded at $1,319.90 today. Even after gold dropped 31 percent from a record $1,923.70 in September 2011, prices are twice the average of 2006.
“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.
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 Dec. 31, filings showed Feb. 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 Jan. 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.