Morgan Stanley lowered its gold price forecasts citing the possibility of reduced US Federal Reserve monetary stimulus or outright withdrawal from the current quantitative easing programme. “With investor demand for safe-haven assets waning against the backdrop of a strengthening US dollar and rising US bond yields, market conditions for gold and silver have become markedly less favourable,” the bank said in a note. The bank cut its 2013 gold price forecast by 5 per cent to $1,409 an ounce and its 2014 estimate by 16 per cent to $1,313. The precious metal’s plunge to three-year lows last week is drawing a muted response from Asian consumers and not a repeat of the buying frenzy seen in April as India’s curbs on trade of the precious metal and renewed concerns about China’s growth dent demand. India and China are the world’s two top gold consumers, so their retail appetite plays a key role in international gold prices. A drop in gold prices in April to a then two-year low unleashed years of pent-up demand, triggering a wave of buying of coins and jewelry across Asia. With much of that demand sated, an even deeper price fall this month has failed to draw consumers, gold traders said on Tuesday. Asian cash premiums to benchmark London gold prices, the best measure of the strength of demand for the precious metal, are now down from record highs in May. And with physical demand failing to match the flow of investment out of exchange-traded gold funds, prices are likely to come under further pressure. Spot gold is already down about 25 per cent this year. “There is only a slight improvement in demand right now due to the price drop,” said Dick Poon, general manager of Heraeus Metals in Hong Kong. “It’s definitely not up to April levels.” “Part of the reason is weak seasonal demand. But economic factors and China growth are also hurting.”
Posted on: Wed, 26 Jun 2013 03:04:09 +0000
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