Gold outlook for 2013 revised on U.S. optimism

On Wednesday, the U.S. Comex gold futures gapped down $25 upon open and traded as low as $1,705.50. The gold futures retraced almost half of the losses and rose 0.62% to $1,727.20 on Thursday. Week-to-date the gold futures fell 1.38%. Some large speculators may be betting on a resolution of the U.S. fiscal cliff soon as well as a faster pace of economic recovery in the U.S. versus other parts of the world, thus boosting the attractiveness of the U.S. dollar. In the past two days, the S&P 500 index rebounded 1.22% while the Euro Stoxx 50 index rose 1.50%, both reflecting optimism towards the U.S. budget negotiations. The Dollar Index is at 80.204 on Thursday and is flat for the week.

A Global Investor Poll Favors the U.S. over Europe

The New York Fed President said on Thursday that the Fed will continue to be accommodative until it sees a sustained improvement in the economic growth and labor market outlook. He also believes that the U.S. fiscal sustainability is a matter of political will and not an economic question. A recent Bloomberg global poll of 862 investors shows that over 66% of investors believe in a stabilizing or improving global economy compared to a little over 50% in September. The investors like the U.S. equity market the best next year. Confidence in the U.S. is also rising while pending home sales rebounded 5.2% in October. Household purchases however grew only 1.4% in Q3 while the U.S. real GDP grew 2.7%. The Euro-area economic sentiment index rose 1.4 points to 85.7 in November although there is a worry that Germany may slip into a recession. Investors in the global poll think that the EU stock returns will be the worst in 2013. More fund inflow into the U.S. could boost the demand for the U.S. dollar, hurting gold prices.

Decent Outlook for 2013's Gold Price

Analysts' median forecast for 2013 year-end gold price has risen from $1,832 as of end-September to $1,850 currently. This is about 7% higher than the current level. Commerzbank expects gold to reach $2,000/oz next year, citing supporting factors such as: More central banks buying gold due to their continued ultra-loose monetary policy or addition to reserves, more active Indian buyers, continued low real interest rates, rebound in Chinese growth rate and expected deficits in gold supply to continue into 2013.

What to Watch

Lots of manufacturing data to watch next week: China's November HSBC manufacturing PMI on Dec. 2, the U.S. November ISM manufacturing index on Dec. 3 and the November Euro zone PMI on Dec. 5.

On Wednesday, the U.S. Comex gold futures gapped down $25 upon open and traded as low as $1,705.50. The gold futures retraced almost half of the losses and rose 0.62% to $1,727.20 on Thursday. Week-to-date the gold futures fell 1.38%. Some large speculators may be betting on a resolution of the U.S. fiscal cliff soon as well as a faster pace of economic recovery in the U.S. versus other parts of the world, thus boosting the attractiveness of the U.S. dollar. In the past two days, the S&P 500 index rebounded 1.22% while the Euro Stoxx 50 index rose 1.50%, both reflecting optimism towards the U.S. budget negotiations. The Dollar Index is at 80.204 on Thursday and is flat for the week.

A Global Investor Poll Favors the U.S. over Europe

The New York Fed President said on Thursday that the Fed will continue to be accommodative until it sees a sustained improvement in the economic growth and labor market outlook. He also believes that the U.S. fiscal sustainability is a matter of political will and not an economic question. A recent Bloomberg global poll of 862 investors shows that over 66% of investors believe in a stabilizing or improving global economy compared to a little over 50% in September. The investors like the U.S. equity market the best next year. Confidence in the U.S. is also rising while pending home sales rebounded 5.2% in October. Household purchases however grew only 1.4% in Q3 while the U.S. real GDP grew 2.7%. The Euro-area economic sentiment index rose 1.4 points to 85.7 in November although there is a worry that Germany may slip into a recession. Investors in the global poll think that the EU stock returns will be the worst in 2013. More fund inflow into the U.S. could boost the demand for the U.S. dollar, hurting gold prices.

Decent Outlook for 2013's Gold Price

Analysts' median forecast for 2013 year-end gold price has risen from $1,832 as of end-September to $1,850 currently. This is about 7% higher than the current level. Commerzbank expects gold to reach $2,000/oz next year, citing supporting factors such as: More central banks buying gold due to their continued ultra-loose monetary policy or addition to reserves, more active Indian buyers, continued low real interest rates, rebound in Chinese growth rate and expected deficits in gold supply to continue into 2013.

What to Watch

Lots of manufacturing data to watch next week: China's November HSBC manufacturing PMI on Dec. 2, the U.S. November ISM manufacturing index on Dec. 3 and the November Euro zone PMI on Dec. 5.

About the Author
Austin Kiddle

Austin Kiddle is a director of the London-based gold broker Sharps Pixley Ltd.

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