Metals - Regional

LBMA survey returns US$1,405/oz gold price by November 2014

LBMA survey returns US$1,405/oz gold price by November 2014

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Delegates and attendees at the London Bullion Market Association's annual gold conference in Rome forecast a price rebound to US$1,405/oz by November 2014.

Survey respondents expect silver to rise to US$25/oz by November next year, when the next annual meeting will be held in Peruvian capital Lima.

Gold closed Wednesday at US$1,306.25/oz on the London Bullion Market, up from the previous day's US$1,290.75/oz after the US government shutdown prompted mass selling across the metals. Silver closed Wednesday at US$21.14/oz.

YEAR IN REVIEW

Gold dropped US$200/oz in two days in April and hit a 2013 low of US$1,192/oz in June, prompting investors to divest ETF holdings en masse. ETF outflows have reached around 700t so far this year. The lower price environment has, however, resulted in improved physical demand, especially from Asia.

"The monetary and investment argument for gold is negative, but the physical side is generally positive," James Steel, a HSBC commodities analyst, told Bloomberg during the LBMA conference. "Continued high levels of Chinese demand will be supportive. Expectations for Fed tapering are largely digested. Pressures will be if tapering is faster and more severe than expected."

FRAGILE SENTIMENT

Market sentiment [for gold] is very challenging, according to Philip Newman, director of Metals Focus. "The market is unconvinced that there are a lot of legs for gold to move higher," Newman said in an interview with Kitco News at the conference.

After gold's fall from grace in April, the market has been characterized by volatility and uncertainty, according to Newman, with institutional investors unconvinced about the path for gold.

The executive expects the gold price to test more to the upside than to the lows over the next few months, with a possible rise to US$1,500/oz.

The consensus view at the conference was that gold is at risk of short term weakness, but that prices will likely rise to over US$2,000/oz in the medium to long term.

ASIAN DEMAND

"This year marks the shifting of Western-centric paper market to Eastern-centric physical market, with India and China accounting for 80% of physical demand from 46% previously," Sharps Pixley CEO Ross Norman said at the conference.

China is expected to overtake India this year as the world's number one gold consumer as rising wealth among its growing middle class has led to increasing demand.

"We've seen, through our own business out in Asia, that our turnover has doubled in the Asian time zone over the last year," said Jeremy East, global head of metals trading at Standard Chartered.

Gold prices will be dictated by continued demand from Asia and not by US newsflow, the CEO of Toronto-based Agnico Eagle Mines, (NYSE, TSX: AEM) Sean Boyd, said recently.

"The story is the physical flow of gold is moving. We really don't feel that the Indian market is at risk of seeing a sharp decline in demand, or the Chinese market is going to see a sharp decline in demand," Boyd said.

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