Monday, July 15, 2013

Gold Prices May Rebound Toward Year's End...
Gold prices could rebound toward the year’s end as the current headwinds for the metal, selling by exchange-traded-fund investors and concerns about the Federal Reserve tapering its stimulus program ease, said a German bank on Monday.

Commerzbank said that if gold can rebound, that will help silver, too. Platinum and palladium should continue to receive price support from supply risks and strong demand.
They estimated gold prices will average $1,200 an ounce in the third quarter, rising to $1,300 in the fourth quarter and to $1,400 by the first quarter of 2014. By the end of 2014 they see gold prices rising to $1,600.

For silver they see prices averaging $19 in the third quarter, $21 in the fourth quarter and $23 in the first quarter next year. For platinum they see prices at $1,350, $1,425 and $1,500, with palladium prices averaging $675, $700 and $725, respectively, in the third and fourth quarters of 2013 and first quarter of 2014.

Gold prices fell to a three-year low of $1,180 by the end of June, caused by a sharp rise in real interest rates because of speculation about an imminent reduction in the bond purchases by the Fed as part of their quantitative easing program.

Commerzbank said despite the rise in real interest rates, they still remain low. “In the past, real interest rates had to rise to more than 2% over a prolonged period to have a sustained negative impact on the gold price. We do not expect this to happen. After the current phase of adjustment in the wake of the announced scaling back of the Fed's bond purchases, the headwind affecting the gold price should therefore ease from this side,” they said.

They also said that they expect ETF outflows to be limited, even if prices fall further. “Most of the remaining ETF holdings of almost 2,000 tons are likely to be held for other reasons than short-term profit maximization, i.e. mainly to hedge against long-term financial market risks and a loss of purchasing power due to inflation and currency devaluation. These motives continue to apply given the unresolved debt crises, high sovereign debt in the industrialized countries and therefore the continuation of ultra-loose monetary policies by the major central banks,” they said.

If gold prices rise on a sustained basis, “we would also expect silver to pick up again significantly,” they said, citing a rebound in the global economy resulting in greater industrial demand.

The PGMs are likely to be supported by concerns about South Africa and the potential production shortfalls because of simmering conflicts between unions and mines. Demand for PGMs is strong on both the automotive side and from investor demand, they said.

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