From the Kitco website
Our friends at RBC issued their forecast for the yellow metal for '09 and it goes as follows:
"Gold prices will likely remain firm during the first three months of this year, held up by seasonal demand for physical gold and continued demand by investors looking for a safe haven, but could lose some ground in the middle of the year, before surging back again, analysts at RBC Capital markets predicted this week.
In a gold outlook report titled 'Beginning and ending 2009 with a bang...but risk is in mid-year," RBC forecasts that 2009 will prove a volatile year for the yellow metal. The analysts maintained their average gold price forecasts of $850/oz for 2009, $875/oz for 2010, and $900/oz long-term, but expect that the metal will trade in a range between $750/oz and $1,000/oz this year.
A combination of physical and investment demand would likely keep prices in a range of between $900/oz and $950/oz in the first quarter. On Thursday afternoon, gold was trading at around $912/oz. The metal has surged since the year began, buoyed by safe-haven buying amid a global financial crisis.
"However, by mid-year, our expectation of an extended global recession could result in significant economic pressures in the emerging market economies and we would expect gold to retreat and test $750/oz and gold equities to correct significantly," the RBC analysts predict.
"In our view, there is risk of a significant June-July period of weakness for gold demand and the potential for emerging market scrap sales in an extended global recession."
This expected destocking or sales of scrap gold could be similar to what happened in 1998 during the Asian Tiger crisis, when gold sales more than offset investment demand for gold, which led to lower gold prices.
However, if the expected mid-year correction does occur, investors would do well to use the pullback as a buying opportunity, as RBC expects that gold will return to the $1 000/oz level, as the global economy starts showing signs of recovery later this year or early in 2010.
"The extraordinary amount of fiscal and monetary stimuli is expected to result in a recovery of the global economy in 2010, and gold equities have traditionally rallied early in an economic recovery cycle."
The rebound in the gold price will also be accompanied by a corresponding recovery in gold shares, RBC predicts. Earlier this week, brokerage UBS upgraded its ratings for five North American gold producers, including Barrick Gold, saying investor and speculative demand are boosting gold prices. The brokerage raised its 2009 gold price target to $1 000 per ounce from its prior view of $700 per ounce.
While $850 as an average is about $40 higher than what we projected at the end of December last year, bear in mind that RBC analysts also believe that a recovery is set to begin about one year earlier than we feel it might.
Will return in the PM - with the final thoughts for the week - from sunny Orlando.
Jon Nadler
Senior Analyst
Kitco Bullion Dealers Montreal
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