Gold Estimate Cut at Morgan Stanley, Prices Buoyed by Fed Policy

Low interest rates and quantitative easing will boost investor purchases of gold and buoy prices this year, Morgan Stanley said, even as it lowered its forecast for the precious metal. Platinum may advance as supplies tighten.

“We remain bullish on the gold price outlook in 2013 despite recent selling pressure triggered by market concerns of an earlier-than-previously-anticipated tightening in U.S. monetary policy,” analysts Peter Richardson and Joel Crane wrote in a report today. The bank expects gold to average $1,773 an ounce this year, 4 percent less than an earlier forecast. Prices may gain to $1,845 in 2014.

Gold climbed for a 12th year in 2012, the longest run of annual gains in at least nine decades as governments from the U.S. to Europe and Japan boosted stimulus to buoy economic recoveries. Danske Bank A/S (DANSKE) and Credit Suisse Group AG, the most-accurate gold forecasters, predict prices will probably peak this year as central-bank stimulus will sustain buying as a hedge against inflation and currency devaluation.

“We are skeptical that dissenters within the FOMC on current monetary policy will succeed in overturning the current policy settings before the end of 2014, given lingering tail risks to growth and still elevated levels of U.S. unemployment,” Morgan Stanley said. Low interest rates, an ongoing commitment to quantitative easing and a below-par recovery with pressure on the dollar will still combine to encourage investment buying, despite elevated prices, it said.

Gold for immediate delivery was little changed at $1,684.45 an ounce at 7:16 a.m. in Singapore, after declining 0.4 percent yesterday. Prices climbed 7.1 percent in 2012.

The U.S. House of Representatives voted yesterday to temporarily suspend the nation’s borrowing limit, removing the debt ceiling for now as a tool for seeking deeper spending cuts. The measure, passed 285-144, lifts the government’s $16.4 trillion borrowing limit until May 19.

The platinum market will see a “negligible” surplus in 2013 after production cuts by Anglo American Platinum Ltd. (AMS), the world’s biggest producer, according to Morgan Stanley. Prices may average $1,700 an ounce in the first quarter and $1,710 in the second quarter, the bank said.

To contact the reporter on this story: Phoebe Sedgman in Melbourne at psedgman2@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

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