CPM Group - price of gold will not surpass its all-time high in the foreseeable future

The gold price dipped $5.06, or 0.3%, to $1,657.89 per ounce Thursday morning despite two worse than expected U.S. economic reports.  The price of gold oscillated around $1,660 in overnight trading and later showed a muted reaction to data on weekly jobless claims and GDP.  Silver dropped in concert with the gold price, by 0.4% to $31.97 per ounce, while the U.S. Dollar Index rose 0.1% to 79.21.

One firm that is rather cautious on the prospects for the yellow metal is CPM Group, an independent commodities research and investment banking company.  In its recently published “Gold Yearbook 2012,” the firm argued that the price of gold will not surpass its all-time high in the foreseeable future.  Jeff Christian, Founder and Managing Director of CPM Group, wrote that “We are looking for the (gold) price to stay above $1,500 this year and above $1,400 over the next few years.

CPM attributed its stance to a less supportive environment for gold prices.  Although the firm expects economic uncertainty to continue to support the yellow metal, it contended that concerns of another global financial crisis have been substantially reduced.  In addition, CPM cited a decline in the growth rate of central bank purchases of gold – which fell from 15.3 million ounces in 2010 to 12.7 million in 2011.
In contrast to CPM Group, Goldman Sachs presented a more bullish forecast for the price of gold.  The firm reiterated its three, six, and 12-month gold price targets of $1,785, $1,840, and $1,940 per ounce, respectively.

“While gold prices have returned to trading with a strong inverse correlation to US real rates since late December, at sub-$1,700/toz they remain below the level implied by the current 10-year TIPS (treasury Inflation-Protected Securities) yields,” analysts at Goldman Sachs wrote in their report.  “We believe that despite last fall’s decline in 10-year TIPS yield to -15 bp (basis points), the gold market may have been expecting that real rates would soon be rising along with improving economic growth, leading to a sharp decline in net speculative length in gold futures.”

“Accordingly, a simple benchmarking of real rates to US consensus growth expectations suggested a level of +40 bp by year end,” the firm added.  “In our modeling of gold prices to real rates, this higher level of real rates would be consistent with the current trading range of gold prices.”

Looking ahead, Goldman Sachs noted that “Our US economists forecast subdued growth and further easing by the Fed in 2012, which should push the market’s expectations of real rates back down near 0 bp and gold prices back to our 6-mo forecast of $1,840/toz. Consequently, we continue to recommend a long gold position.”

Comments

Post a Comment

Popular posts from this blog

Gold edges up on weaker dollar, dovish U.S. Fed policy bets

Image
 Gold edged higher on Monday, helped by a weaker dollar and expectations that the U.S. Federal Reserve will reiterate its dovish monetary policy stance this week. Spot gold was up by 0.1% at $1,943.58 per ounce. U.S. gold futures rose 0.1% to $1,950.10 per ounce. “Gold is firm on the basis that the Fed could adopt a further dovish message with respect to average inflation targeting,” said Michael Hewson, chief market analyst at CMC Markets UK. “If you want to have a policy of average inflation targeting, you’re going to have to go into detail as to how you are going to arrive at that particular outcome.” The dollar retreated on Mond ay, bolstering gold’s appeal for investors holding other currencies, ahead of the Fed’s policy decision due on Wednesday. “If inflation forecasts remain at 2% or below, this could offer gold a tailwind as the zero-yielding metal thrives in a low-interest rate environment,” said FXTM analyst Lukman Otunuga. Market participants are also waiting
Read more

For the gold price, two outcomes are possible.

Image
For the gold price, two outcomes are possible. First is a return to or near the April low ($1,277.40). Second is a drop to a lower low, $1,240 - $1,260. Yet a third possible outcome is that the June and December lows were not a double bottom and one further drop may come. I account that the least likely, and look for a low here by the end of the week, but I'm no more'n a nacheral born durnd fool from Tennessee, so what do I know?   You'd think that an institution charged with promoting the gold industry would produce reports that at least cast the best light on gold's prospects. You'd think wrong, if you're thinking about the World Gold Council. They've been negative on gold for, oh, the last 14 years or so. Today they issued a report that contained a nugget about Chinese business using physical gold as collateral for bank credit ($40 bn worth) but they managed to tease a gloomy forecast even out of this inventive monetary use. That and bad
Read more

The price of gold advanced as high as $1,603.40 per ounc

Image
The gold price broke out to a new all-time high above $1,600 per ounce Monday morning, rising for the eleventh consecutive trading session. The price of gold advanced as high as $1,603.40 per ounce before backing off to trade just the $1,600 level. The yellow metal gained on the back of a surge in borrowing costs for Italy, the latest European nation to see its bond market come under heavy selling pressure. The lack of a deal to raise the $14.3 trillion debt ceiling also helped boost gold prices. The eleven-day rise in the gold price is the longest winning streak since January of 1980. The gold price delivered another noteworthy performance last week, climbing 3.2% on its way to a series of fresh record highs. With Monday’s advance, the gold price extended its monthly and year-to-date gains to 6.6% and 12.5%, respectively. Last week’s two-day Congressional testimony by Chairman Ben Bernanke on the economy and monetary policy revealed that the Fed remains open to the
Read more