Gold will extend a drop into 2014 as the U.S. Federal Reserve tapers stimulus, Goldman Sachs Group Inc. said, forecasting that a decision by the central bank to start reducing bond-buying next week may spur renewed selling.
The reduction of asset purchases may be the catalyst that pushes gold prices lower, analysts including Jeffrey Currie and Damien Courvalin wrote in a report today. Goldman’s economists expect that policy makers will curb quantitative easing at the Sept. 17-18 meeting as the economy improves, the report said.
Gold slumped 18 percent in 2013 after rallying for 12 years as investors sold the metal at record pace from exchange-traded products on prospects for a global recovery. The Fed will pare the $85 billion monthly bond-buying at the meeting, according to a Bloomberg survey on Sept. 6, backing away from the stimulus program used by the central bank to revive the largest economy.
“Gold prices will decline into 2014 on the back of an acceleration in U.S. activity and a less accommodative monetary-policy stance,” the analysts wrote. “The September FOMC meeting, where our economists expect a tapering of QE3, could prove the catalyst to push gold prices lower.”
Gold futures on the Comex, which touched a record $1,923.70 an ounce two years ago, traded at $1,366.90 at 10:02 a.m. in London. Goldman kept its three- and six-month targets at $1,300 an ounce, while saying that the approach of the U.S. debt ceiling may limit declines until the borrowing threshold is raised by October. The bank’s 12-month target is $1,175.
Societe Generale SA, Citigroup Inc., ABN Amro Group NV and Macquarie Group Ltd. are among banks predicting lower prices in 2014 as the global economy recovers and inflation fails to accelerate. JPMorgan Chase & Co. and Bank of America Corp. say bullion may be bottoming as the rout boosts demand.
Investors sold 683.3 metric tons of gold from ETPs this year, reducing holdings by more than $56 billion to 1,948.6 tons, according to data compiled by Bloomberg. The assets have dropped every month this year after peaking at 2,632.5 tons in December.
Gold should drop to $1,200 by about the end of the year on sales from ETPs and a reduced likelihood of a U.S. military action against Syria, Societe Generale said in a report e-mailed yesterday. President Barack Obama said yesterday that he has asked Congress to delay a vote authorizing a strike.
The Federal Open Market Committee will reduce Treasury purchases to $35 billion a month from $45 billion, while maintaining mortgage-bond buying at $40 billion, according to the median of 34 responses in the Bloomberg survey. That pace was unchanged from an Aug. 9-13 poll, as was a projection that the program will end in June.