Australia Cuts Gold-Price Outlook as Fed Expected to Taper

Gold is expected to decline into 2014 as investors shift into other asset classes amid speculation that the U.S. Federal Reserve will slow stimulus, according to the Australian government forecaster.

Prices may average $1,275 an ounce next year from $1,439 in 2013, the Canberra-based Bureau of Resources and Energy Economics said in a report today. That compares with the bureau’s estimates in June of $1,340 for 2014 and $1,444 for this year. Spot bullion has averaged about $1,457 in 2013.

Gold tumbled 23 percent this year on expectations that the U.S. central bank will taper asset purchases, dimming bullion’s allure as shares rallied. Twenty-four of 41 economists surveyed by Bloomberg in September said that the Fed will start to pare stimulus in December. The Federal Open Market Committee unexpectedly left the program unchanged last month. Australia is the world’s largest bullion producer after China.

“Prices are expected to rebound in the near term in response to the FOMC announcement,” the bureau said. “Speculation on the tapering is likely again in 2014, particularly if more positive U.S. economic data is reported. This market speculation, as well as investor preferences shifting to other asset classes as interest rates recover to normal levels, are expected to result in lower gold prices.”

Gold for immediate delivery dropped as much as 0.8 percent to $1,277.15 an ounce, the lowest level since Aug. 7, and traded at $1,291.67 at 4:20 p.m. in Singapore. Bullion fell 3.1 percent yesterday on bets that the U.S. government’s first partial shutdown in 17 years will be short-lived.

Australian output may drop to 242 tons in the year started July 1 from an earlier estimate of 263 tons and 254 tons the prior year, on production cuts and mine closures, the bureau said. Exports may total 282 tons in 2013-2014, down the June estimate of 304 tons, and compared to 280 tons the prior year, it said.

To contact the reporters on this story: Phoebe Sedgman in Melbourne at psedgman2@bloomberg.net; Glenys Sim in Singapore at gsim4@bloomberg.net

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

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