Tuesday, May 11, 2010

Kitco, Barclays, and Societe General Forecast Gold to Drop to $680 and $800

No doubt, the collapse of the Euro and the rise of the US dollar will have a major effect on the price of gold. Kitco, Barclays, and Societe General are all forecasting gold to drop to $800 or lower.

Today, Jon Nadler, senior Analyst at Kitco, was interviewed on BNN (re. fascinating Rhodium) and reiterated the forecast: gold to drop to between $680 and $800. This is based on fundamental supply and demand. Mr. Nadler says that last year there was an oversupply of 500 tons of gold.

Yesterday, he wrote an article on Kitco's site about gold prices.

Watch interview.

Says Nadler:

"Meanwhile, following last week’s call for $800 gold by Barclays, another firm has joined the ranks of those calling for an eventual adjustment in the value of the yellow metal. This time, that similar kind of prognosis comes from investment bank Société Générale which is projecting gold prices to turn down and trade below $800 by the end of this year.

Recall that the Barclays projection allowed for a return to that number by perhaps as late as the end of 2011 or the beginning of 2012. SocGen bases its outlook on a stall in investment demand for the yellow metal. Its analysts opine that such reduction in demand by spec funds and other investors is not likely to be offset by an equivalent recovery in jewellery fabrication demand. The fact that gold prices fell quite substantially on faltering investment demand during the Dec-Jan period, and once again in March, was cited by SocGen as a potential harbinger of more of the same, later in 2010.

Clearly, spec fund activity continues to dominate gold’s price patterns for the moment, and is overshadowing otherwise feeble market fundamentals. This could continue for so long as the fear premium is maintained by turbulent external conditions. SocGen analysts note however, that investment activity is clearly not the only price driver in the gold market, even if it is currently the bullish influence (perhaps in addition to the fact that central banks have not come to market with much-if any-gold at all since the year started)".

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