THAILAND - The Gold Price Sentiment Index this month is well below average, according to a survey by Gold Research Centre, reflecting the conviction that gold prices have not yet found their equilibrium and may not easily bounce back. The expectation index also stayed low, as investors do not expect a rebound in the next three months.
After a Bt650 (S$26.81) net cut on Wednesday, local gold prices yesterday recovered by only Bt100 (S$4.12) per baht weight at 4.09pm, bringing gold bar and gold ornament prices to Bt18,250 (S$752.63) and Bt18,750 (S$773.25).
While bullion in Singapore for immediate delivery yesterday rose as much as 1.5 per cent to US$1,244.85 (S$1,602.02) an ounce, after plunging to $1,222 (S$1,572.62) on Wednesday, the baht yesterday strengthened 0.1 per cent to 31.13 (S$1.28) per dollar. The currency has fallen 6 per cent this quarter, the worst performance since September 2000, according to Bloomberg.
HSBC Securities (USA) cut the 2013, 2014 and 2015 gold price forecasts in April following financial and bullion market turmoil. The average annual gold price for this year is revised down from $1,542 (S$1,984.43) an ounce to $1,396 (S$1,796.54).
Its analyst James Steel said that after an initially encouraging upwards price performance in the aftermath of the April sell-off, which lasted until early May, the bullion rally lost momentum and gold and silver prices resumed their slide, with losses accelerating notably in the aftermath of the June 18-19 FOMC meeting.
HSBC further cut the forecast due to five factors. First, the discussion by the Fed of a tapering, or reduction, of its quantitative easing asset purchases was more aggressive than initially envisaged, and has resulted in higher US Treasury yields, which are traditionally negative for gold.
Second, turmoil in emerging markets and the prospects of lower growth in China have weighed on bullion.
"Our economists cut the 2013 China GDP forecast from 8.2 to 7.4 per cent and 2014 GDP forecast from 8.4 to 7.4 per cent," he said.
Third, a slowdown in China's GDP growth may reduce consumer appetite for physical gold in that country. Fourth, HSBC's bullish US dollar view implies more gold weakness ahead. Fifth is lacklustre demand.
"Although we expect a positive physical demand response to eventually cushion gold's drop, we do not believe it will be of the scale or magnitude of the reaction in April. Price-sensitive buyers may wait for a well-defined bottom before entering the market. Increased import duties and the Indian government's efforts to reduce gold imports are curbing that nations' demand for bullion and crimp jewellery demand.
"One support for gold was increased central bank buying, as reserve mangers sought to diversify their foreign exchange reserves. These reserves are now either falling or not growing as quickly due to declines in current account balances in many EM nations as a consequence of the slowdown."