Gold remains on course to rally through this year and into 2013, but heady forecasts of $2,000 an ounce are receding fast as the economy stabilises, a Reuters poll showed on Friday.
Gold has risen for a decade and spiked above $1,920 an ounce last September when the euro zone sovereign debt crisis threatened to engulf Italy and Spain.
That spurred talk of $2,000 gold but just one analyst of 33 polled expected it to average that price this year, down from 5 of 45 in a similar poll in January.
Analysts produced a median forecast of $1,750 an ounce for gold in 2012, down from $1,765.00 in January's survey.
While analysts trimmed views on gold, which is now trading at about $1,670, they raised forecasts for silver.
Alexandra Knight is an economist with National Australia Bank, where analysts are forecasting an average gold price of just $1,550 an ounce, the most bearish call in the survey.
That would mean little rise from last year's average price of $1,544.
“We expect the price of gold to ease from its current level as the recovery in the US economy gains momentum and its currency appreciates, shifting demand away from gold and towards currency-based investments and equities,” Knight said.
“The impact of an appreciation of the US dollar on the gold price will be particularly pronounced. given that a large majority of gold is invested in the US.”
Gold usually moves inversely to the dollar as non-US investors find it cheaper to buy gold in their own currencies when the dollar weakens and more profitable to sell it when the US unit gains.
NEXT YEAR, FED WATCH
Gold is expected to average $1,700 an ounce in the second quarter of this year, the poll showed, down from $1,730 in January's poll.
Analysts trimmed their 2013 forecast to $1,825.00 from $1,830.63.
Main drivers for the price include central bank buying, along with robust demand from China, which is expected to overtake India this year as largest consumer of the metal.
Also key are real interest rates, which factor in inflation, as these remain negative across most of the Group of 20 richest nations, helping gold as a non-yield-bearing asset compete for investors.
It hit a 3-1/2 month high of $1,790.30 in February but fell from those levels after US Federal Reserve Chairman Ben Bernanke surprised markets with a speech that made no suggestion of additional policy measures such as a third round of bond buying, or quantititative easing, to boost growth.
Central banks, including the European Central Bank and Bank of England, have either extended super-cheap loans to commercial banks, bought their own government bonds to pin interest rates or intervened in the currency markets to keep their currencies competitive and maintain an accommodative interest-rate environment.
Standard Bank analyst Walter de Wet forecast gold at $1,790 an ounce for this year and said central bank buying would be supportive.
“Our bullish view on gold has always been independent of whether or not QE3 occurs. We feel that global reserve accumulation will continue to grow (spearheaded by emerging markets and particularly China) and consequently provide the main impetus for gold-friendly growth in global liquidity during 2012,” he said.
Analysts also expect ongoing consumer demand, especially from Asia, to support gold, albeit on a more modest scale than last year.
“While still present, buying takes place on a much lower level than it was previously the case when prices came off significantly. The same is true for China, where buying is still present though not on levels we witnessed in 2011,” Alexander Zumpfe, a trader at Heraeus in Germany, said.
Heraeus expects gold to average $1,660 this year, with most gains coming in the fourth quarter.
BRIGHTER ON SILVER
The market turned more optimistic over silver over the course of the first quarter of the year.
Analysts forecast a 2012 price of $34.00 an ounce, up from $33.25 in January.
Silver is currently trading around $32.30 an ounce, up 16 percent this year. It is often seen as a cheaper safe-haven alternative to gold, although its high volatility and industrial applications can make it unpredictable.
It is used in chemicals and electronics, as well as products such as solar panels.
“Silver remains an attractively priced safe haven commodity relative to gold,” said Morgan Stanley commodity analyst Hussein Allidina, who is forecasting an average price of $32.55 an ounce.
“However, silver's well attested volatility, its vulnerability to weakening industrial demand, and weaker supply credentials make it a less fundamentally supported market than gold at present.” - Reuters