Gold Price Forecast 2014 Trend Is Negative

HSBC is forecasting that sales of coins and bars could increase to a record 1,700 tonnes in 2013 From a technical point of view, RSI is heading down, MACD has taken a downturn and trading below the Ichimoku clouds is highly negative for this week.

Auckland (I-Newswire) December 3, 2013 - After statement of Federal Reserve for scaling down its program to support the US bond market. Gold prices declined sharply and the asset managers and wealthy individuals reacted by selling their holdings leading to large outflows from gold exchange traded funds.

Holdings in gold ETFs have now sunk below the 2000 tonne mark( down 27.7 per cent) after ending 2012 at a record 2767 tonnes according to Barclays Capital. Suki Cooper, precious metals analyst at Barclays, says the threat of further ETF outflows is a clear risk for the gold market. However, if the gold price can hold above the $1200 mark, then fewer ETF holdings will be loss-making, which could help to stabilize the amount of metal in these vehicles, says Ms Cooper. But she also cautions that factors such as uncertainty about US monetary policy that previously supported gold have failed to reignite investor demand in recent months. James Steel, precious metals analyst at HSBC, says gold's weakness this year cannot be blamed solely on concerns about future changes in US monetary policy. With the global economy entering a more "normal" recovery phase.

Mr Steel expected a modest recovery in ETF holdings in 2014. According to him investment flows are now less of an influence on the gold price than physical buying of jewelry, coins and bars. HSBC is forecasting that sales of coins, medals and small bars could increase by more than a third to a record 1,700 tonnes in 2013 as this year's fall in prices has attracted more interest from retail investors. HSBC is also forecasting that global demand for gold jewelry will increase 16 per cent this year to around 2,200 tonnes, helped by the growing appetite of consumers in China, which has overtaken India as the world's largest jewelry market. According to Mr Steel ,physical gold is transferring from west to Asian consumers. Chief investment officer of BlackRock's,Evy Hambro, says that instead of buying interest in small gold bars more than selling by gold ETF investors, the price is not increased this year. Mr Hambro says selling pressure from gold ETFs is likely to moderate as most of the holdings acquired after the US central bank started QE have been liquidated now. Looking forward, Mr Hambro says investors are underestimating the strength of future demand growth in China where imports this year have been significantly higher than expected. Mr Hambro said If Chinese gold consumption levels rises as Indian showed in previous few months, there would be very support for the market. Joni Teves, precious metals analyst at UBS, says demand from China should remain resilient but is unlikely to match further selling from ETF investors and hedge funds. UBS has cut its three-month price forecast to $1100 per troy ounce.

Nicholas Brooks, precious metals analyst at ETF Securities, says gold still has a worthwhile role to play for long-term investors both as a portfolio diversified and as a hedge against extreme situations. "The extent of monetary easing in the developed countries make it likely that we will see inflation rising or currency debasement or any other severe financial crisis," says Mr Brooks. 2014 will be a tough year for gold investors if US dollar strengthens, Mr Brooks insists that gold still provides important portfolio protection for long-term investors. Though there are great chances that political issues may try to detract the market, however gold is out of favour now and it is the best time to buy it. Gold is now relatively cheap as an insurance for long-term traders.

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December 3, 2013

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