Bank Sarasin in its latest analysis said in the short- to medium-term, global investor and central-bank demand would support gold prices, underpinned by Asian demand for jewellery.
Notwithstanding the bullish outlook for gold, Bank Sarasin said it no longer recommends long-term gold exposure and advises investors to watch for sustained interest rate increases.
The Swiss bank expects gold to trade at $1,575 by end-third quarter 2011 and $1,650 by end-second quarter 2012.
In its “Commodity Strategy” report, the bank said in the long-term, investors are likely to unwind gold positions in favour of higher yielding assets. Rising production could also pose price risks, it cautions.
“With the European debt crisis showing no signs of abating, and on-going concerns about the US government’s sovereign credit rating, gold prices have continued to rise driven by investor demand.
Slowing global economic growth will give gold additional support, as any rate hike, in particular in the USA, seems further in the future, pushing down real yields. At the same time, rising inflation in Europe and the US has raised the spectre of stagflation, again encouraging gold purchases,” the bank said.
Central banks, too, have become net buyers of gold, and Bank Sarasin expects this trend to continue. In contrast, Rolf W. Schneebeli, analysts at Gold Services AG, said, “long-term gold is and remains a buy.”
He said since gold price is driven by weak US dollar, a recovery of the greenback would drive up its price in other currencies.
On the outlook for the yellow metal, Schneebeli said, “it remains a buy to protect the investor against inflation.”
In the short term, it seems likely that the price in dollars will be stable to slightly up given the situation about the US budget deficit and money supply developments. “The dollar seems to be massively oversold and as we would anticipate a short term correction of the US Dollar, the gold price in other currencies has even more potential,” said Schneebeli
The World Gold Council, or WGC, in a forecast on the yellow metal, said factors such as continued uncertainty over the US economy and the dollar, ongoing European sovereign debt concerns, global inflationary pressures and tensions in the Middle East and North Africa would continue to drive investment demand for gold.
The WGC predicts that sustained momentum in the demand for Chinese and Indian jewelry will also support growth in the jewelry sector throughout 2011. The WGC expects net purchasing by central banks to continue in 2011 as central banks turn to gold as a means of diversifying reserves.
“The resilience of gold during recent volatility in the commodities market exemplifies the strength of the global gold market and its unique demand drivers,” said Marcus Grubb, managing director of investment at the WGC.
Jewellery demand
Bank Sarasin in its forecast said jewellery demand would put a medium-term floor under gold prices.
“China, in particular, has a strong impact, with jewellery sales up 21 per cent year-on-year. In China the removal of restrictions on investing in physically backed gold ETFs is also driving prices. These ETFs are very popular due to high domestic inflation and limited domestic investment opportunities.” In India, jewellery demand rose 12 per cent year on year despite a 25 per cent increase in average gold prices, with sales expected to surge during the Indian wedding season in the second- and third-quarters. Together, China and India account for 63 per cent of global demand for gold jewellery and thus are important market drivers.
Eliane Tanner, Commodity Strategist at Bank Sarasin, said investment demand is expected to remain robust in the coming months, supported by jewellery demand in emerging markets, particularly China and India. “But investors need to keep a watchful eye on interest rates. A sustained rise will see investors unwind their gold positions in favour of higher yielding assets, so we no longer recommend long-term gold exposure. Investors should be ready to take profits on a reversal in interest rates. That could be as early as mid-2012.”
The bank said increased gold production might put a damper on upside potential.
“Gold mine supply is expected to continue to rise on the back of strong demand and high prices. In the meantime, central banks, traditionally listed on the supply side, became net buyers. In the first quarter of 2010, they were net buyers of 59 tons, surging to 129 tons in the first quarter 2011 to surpass total central bank purchases in 2010 and become the most important factor in the four per cent decline in gold supply in the first quarter this year.
While European central banks have stopped sales, emerging markets central banks are buying in order to diversify their foreign currency reserves, the report pointed out.
As a result of strong investor and central bank demand, and jewellery purchases, Bank Sarasin increased price targets in the short- to medium-term, but expects prices to soften when interest rates start rising on a sustainable basis.
tag; WGC gold prices forecast july 2011, WGC predicts gold price, gold forecast upto agusut 2011, gold price in june and july 2011, predict gold price july 2011, silver price july 2011, jewellery demand 2011, average gold prices july 2011 For the latest updates PRESS CTR + D or visit Stock Market news Today
No comments:
Post a Comment