Gold (COMEX:GCZ13) will drop in each of the next four quarters and reach a four-year low as reduced U.S. stimulus in response to faster economic growth curbs demand for bullion as a haven, the most accurate forecasters said.
The metal will decline to an average of $1,175 an ounce in the third quarter next year, or 11% less than now, according to the median of estimates from the 10 most-accurate precious metals analysts tracked by Bloomberg over the past two years. Prices were last at that level in 2010.
The forecasts underscore how some investors lost faith in gold as a store of value, driving prices to their first annual loss in 13 years. More than $63 billion was erased from the value of gold-backed funds this year, spurring losses for billionaire hedge-fund manager John Paulson, and mining companies announced at least $26 billion of writedowns. Bullion jumped today after Dagong Global Credit Rating Co. cut its U.S. credit rating and on speculation the Federal Reserve will postpone slowing stimulus.
“Desire to buy gold as a hedge against the consequences of monetary policy has diminished,” said Tom Kendall, an analyst at Credit Suisse Group AG in London whose precious-metals forecasts were the second most-accurate over the past two years. “When you’ve got other asset classes, equities in particular, doing so well, then it’s hard to divert investments out of them and into something like gold, which is falling.”
The metal slid 22% to $1,314.85 in London this year after tumbling into a bear market in April. It’s now 32% below the record $1,921.15 set in September 2011. The Standard & Poor’s GSCI gauge of 24 commodities fell 1.4% since the start of January, the MSCI All-Country World Index of equities advanced 15% and the Bloomberg U.S. Treasury Bond Index lost 2.5%.
Gold retreated this month even during the U.S. government shutdown, which began Oct. 1. As U.S. lawmakers last week debated extending an Oct. 17 deadline on the government’s borrowing authority, bullion still fell the most in a month, reflecting weakening demand for the metal as a hedge against financial turmoil. Congress voted yesterday to end the impasse, with bullion losing as much as 0.2%.
While the Federal Reserve refrained from trimming stimulus in September, most policy makers said the central bank was likely to taper this year, according to minutes of the meeting released Oct. 9. U.S. economic growth will accelerate to 2.6% in 2014, from 1.6% this year, according to the mean of 90 economist estimates compiled by Bloomberg.