Nomura raises gold forecasts as price drivers "already reset"

Wednesday, March 5, 2014

Nomura Securities has raised its 2014 gold price forecast to US$1,335/oz this year from the previous US$1,138/oz as the speed of last year's price decline "brings forward the start of the next cycle."

Gold appears set to recover "like a phoenix regenerating from its ashes," RBC analysts wrote in a research note cited by financial magazine Barron's.

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Nomura follows UBS and RBC Capital Markets, both of whom recently raised their gold price forecasts. UBS now sees gold averaging US$1,300/oz this year while RBC has set an average of US$1,400/oz.

For 2015, Nomura is forecasting a gold price of US$1,460/oz, up from US$1,200/oz previously.

"Last year's shift in the gold market was rapid and the price response substantial," Nomura analyst Tyler Broda said. "Instead of a multi-year downtrend, with disinvestment putting pressure on prices over time, many of the variables that drive gold prices have already reset to an extent."

These variables include ETF outflows, which saw a turnaround to inflows in February, gold producers reining in growth projects to protect balance sheets and an "evolving post-QE macroeconomic environment."

Gold closed Wednesday at US$1,337/oz on the London Bullion Market, up from the previous session's US$1,334.75/oz. The yellow metal hit a four-month high on Monday on escalating geopolitical tensions in Ukraine which spurred safe haven buying.

Gold has risen by around 12% this year after falling 28% in 2013 as the global economic recovery gathered pace and Western investors liquidated their gold positions. The lower price environment did, however, spark record consumer demand last year.


Nomura also raised its silver price forecast to US$21.52/oz from a previous US$16.25/oz.

Silver was the worst performing of the four precious metals in 2013, ending the year 36% lower than in January 2013 and at an average price of US$23.79/oz. This year has seen silver climb steadily from a monthly average of US$19.60/oz in December to an average US$19.90/oz in January and US$20.82/oz in February, remaining above the US$21/oz mark since February 14.

In January, the median forecast of 28 analysts in the London Bullion Market Association's precious metals forecast for 2014 pegged silver to average US$19.95/oz this year.

Silver closed Wednesday at US$21.32/oz.