Capital Economics raises gold price forecasts, expects new highs in 2013

Wednesday, December 19, 2012

Gold prices are likely to reach new record highs of at least US$2,000/oz in 2013 despite recent dips below US$1,700/oz and a "major shift in sentiment" that occurred during 2012, according to analysts with UK-based Capital Economics.

The consultancy has raised its price forecasts for the yellow metal, predicting a peak of US$2,200/oz in the second half of 2013 versus a previous forecast of US$2,000/oz, while a high of US$2,000/oz is expected in 2014 compared to a previous prediction of US$1,750/oz.

The gold price rally has "stalled over the last three months," and during this year investors are treating gold more like any risky asset than a safe haven. However, monetary, regulatory and macroeconomic developments together with accelerated demand from India, China and central banks are set to support prices, Capital Economics said in a commentary note.

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Strong recovery in developed countries such as the US, and the prospect of monetary tightening could weaken gold demand, but any growth from emerging markets and "more favorable" regulatory treatment of gold as an asset under Basel III rules would increase demand.

"The decisive factor could be the exit of one or [more] small countries from the euro, which should revive the safe haven demand for gold."

Gold closed at US$1,665/oz on the London Bullion Market Wednesday and has averaged US$1,669.23/oz so far this year.