Everyone is anticipating a big inflationary boost courtesy of the Fed this week, which is always good for gold, but what about the long view? Let’s touch base with the big firms and see what they think.
First off, the CFTC has released its report for the week ending December 4, and notes that the big selloff on gold was speculators dumping much of their long positions, bringing the current net-long position to the lowest point since August. Physical gold buyers (including central banks) were doubtless happy for the price drop. Commerzbank agrees that the drop was due to speculators dropping “paper gold,” noting that “We regard the currently low gold prices as unsustainable.”
ETF Securities notes that whatever weakness there is in the gold market right now, it isn’t from the physical buyers: Global ETP holdings hit a record high of 84.5 million ounces last week. Noting the effect Italian Prime Minister Monti’s resignation had on European markets today, continued central bank buying (South Korea added 14 tons to its gold reserve to bring it to 1.2%) and the expected aftermath of the upcoming fiscal cliff, ETF Securities says that physical demand will remain strong. “[w]e expect the gold price weakness to remain temporary.”
Barclays chimes in as well, noting that the Spanish debt situation, the expected new round of U.S. quantitative easing, and fiscal cliff are some of the “price triggers [which] are stacked in gold’s favor over the forthcoming months…” Merrill Lynch expects gold to hit $2,400/oz by the end of 2014, opining that we now have a hard floor at $1,500/oz due to increasing demand in emerging markets.
Bart Melek, VP at TD Securities, expects gold to rise to the $2,000 over the next 12 months. “We’re not looking for it to happen right away.” he says, noting “Our first quarter 2013 (average) price is $1,825.” Goldman Sachs, despite calling the bull market in gold “over,” still expects the price to rise to the same $1,825/oz mark in the next three months.