The GOLD PRICE is set to flatten in 2013, says new analysis from Bank of America Merrill Lynch, before rising in 2014 on renewed currency weakening by central banks.
The giant US bank's chief gold analyst has cut next year's price target, however – down by 10% from $2000 per ounce – and cut the 2013 forecast by 7% to an average gold price of $1680.
The gold price averaged $1669 in 2012 according to trade body the London Bullion Market Association.
"Redemptions from hedge funds with typically shorter investment horizons have been sizeable," says metals strategist and gold analyst Michael Widmer, noting that only "record purchases" by investors could have led to the multi-year rally continuing.
"Headwinds to gold prices will persist in the near term," Widmer is quoted by MarketWatch, before the market rallies next year.
Formerly at Lehman Brothers, Widmer raised Bank of America Merrill Lynch's one-year forecast to $2000 per ounce in August 2011 – just as prices reached their current record peak – and again forecast $2000 by the end of 2012 in September that year.
Looking ahead, Widmer now says that trends in real interest rates will prove the "most notable" influence on gold prices in 2014, as the post-inflation rate of interest paid on bonds "could trend lower".
That would reduce the opportunity cost of owning gold, and make gold more attractive as a hedge against currency devaluation. Widmer and his team believe renewed attempts by the Bank of Japan to devalue the Yen (and so spur Japanese exports) could see emerging-market central banks increase their gold buying in a bid to diversify their reserves.