Gold News

How Gold Prices Work in the Post-Crash Shortage

MORE MAJOR BANKS have cut their 2013 gold price forecasts following the precious metal's fastest drop in 30 years last month.

Private bank Coutts – famed as the bank used by the British royal family, and part of the Royal Bank of Scotland group rescued by 83% nationalization in 2008 – has meantime reduced the weighting of gold allocations in its client portfolios, according to the bank's chief investment officer for Asia and the Middle East.

"To suggest the gold price makes a lot of upside from here requires either a global crisis or a re-emergence of inflation," said Gary Dugan in an interview, quoted by Bloomberg.

Coutts now holds between 1% and 2% of its clients' money in gold, down from 6-7% as recently as September, he said.

"I can't see in the next 12 months a significant upside surprise on inflation," Dugan went on.

Writing for the UK's Money Observer amid the price crash of mid-April, however, Dugan pointed to $1250 per ounce as the gold price target for Coutts chart-studying technical analysts, and called it "an attractive entry point".

Commodities researchers at ANZ Bank have also cut their 2013 gold price forecast, trimming it by 7% on concerns over economic growth in China – now the world's second-largest gold consumer nation – as well as nervousness amongst Western investors.

Now forecasting an average gold price in 2013 of $1573 per ounce, the Australian bank had previously forecast an average $1690, itself a sharp cut in February from the earlier forecast of $1811 per ounce.

Late last month, London market-maker and major bank storage provider HSBC cut its average 2013 gold price forecast by more than 12% to $1542 per ounce.

HSBC had already cut its 2013 average gold price forecast from $1850 to $1760 per ounce in January.

"[Although] lower prices attract greater buying, especially in India and China," said HSBC's precious metals analyst James Steel, much of this buying is "fragmented" and so "may take months to feed into prices."

ANZ Bank's analysts foresee a rally in the gold price to $1648 per ounce in 2014.


Adrian Ash runs the research desk at BullionVault, the physical gold and silver market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and is now a regular contributor to many leading analysis sites including Forbes and a regular guest on BBC national and international radio and television news. Adrian's views on the gold market have been sought by the Financial Times and Economist magazine in London; CNBC, Bloomberg and in New York; Germany's Der Stern and FT Deutschland; Italy's Il Sole 24 Ore, and many other respected finance publications.

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