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Analysts Believe Gold May Reach Bullish Targets

Release Date: 
Friday, June 8, 2012

Gold prices were lower Friday on stronger dollar as investors continued to respond to Federal Reserve Chairman Bernanke's testimony which dampened expectations of a new round of quantitative easing. Gold was $7.60 lower at 7:44 a.m. Pacific Time on the New York Spot market, trading at $1,581.90 per ounce. Spot silver was $0.25 lower at the same time, trading at $28.44 per ounce. (Click here for the most current spot prices.)

"The fact that the Fed didn't hint at monetary easing has weighed a lot on gold, and of course in this scenario of risk aversion, the (inverted) correlation with the dollar was restored and is having an impact today," said Gianclaudio Torlizzi from T-Commodity. "The outlook for precious metals in the medium-term, however, remains positive because the central banks will have to undertake an expansive monetary policy sooner or later. They are just waiting for the right time; they don't want to use the last cartridge too soon."

The euro fell after a three-notch downgrade to Spain's credit rating and signs of economic weakness in Germany. Fitch Ratings cut Spain's rating to BBB from A, pushing it closer to junk status. German exports and imports fell sharply in April, according to data released Friday.

Several analysts maintain bullish price forecasts on gold. "Gold is still going to $2,000 an ounce this year," said Michael Widmer, an analyst at Bank of America Merrill Lynch in London, who predicts a fourth-quarter average of $1,875.

"Gold remains the currency of last resort," said Jeff Currie, the New York-based head of commodity research at Goldman, which predicts $1,840 by the end of the year. "The case for higher gold prices remains intact."

Peter Sorrentino, a senior fund manager at Huntington Asset Advisors in Cincinnati, which oversees $14.7 billion of assets, said gold may reach $2,000 per ounce in the first quarter of next year.

"The $2,000 target has moved further away, but it still holds," said John Stephenson, who helps manage $2.7 billion at First Asset Investment Management Inc. in Toronto. "We will see some easing, and that will push gold higher, but the reality is that we are on hold until the outcome of the Greece elections."

Hedge fund Soros Fund Management LLC, founded by billionaire George Soros, more than tripled its gold investment in the first quarter.

(Source: "PRECIOUS-Gold extends losses after Fed disappoints," Reuters, June 8, 2012; "Gold futures slide after Fed disappointment," MarketWatch, June 8, 2012 "Gold Bugs Defy Bear-Market Threat With Soros Buying," Bloomberg, June 6, 2012)

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†This material has been prepared for private use. Although the information in this commentary has been obtained from sources believed to be reliable, Goldline does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice.

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