Credit Suisse Group AG is growing less convinced of its forecast that gold will peak on a quarterly basis this year, saying prices are unlikely to return to the 2011 intraday high.
Accelerating U.S. growth and contained inflation means “the downside risks are building for gold,” Tom Kendall, an analyst at the bank in London, said in a report e-mailed today. Gold climbed to an all-time high of $1,921.15 an ounce in September 2011. It averaged a record of $1,718 in the fourth quarter of 2012 and Credit Suisse is predicting an average of $1,790 for the third quarter this year.
“We think it highly likely that the market has already seen the absolute high and we caution that our forecast of a peak in quarterly average terms in the third quarter this year may also prove to be too bullish,” Kendall said. “The peak of the fear trade has now also passed.”
The metal posted its longest rally in at least nine decades last year and investors are holding a near-record amount through gold-backed exchange-traded products as central banks from the U.S. to Europe to China pledged more steps to spur economic growth. Goldman Sachs Group Inc. has said prices will probably peak this year as the U.S. recovers. World economic growth will accelerate to 3.5 percent this year from 3.2 percent last year, the International Monetary Fund estimates.
Gold for immediate delivery rose 0.6 percent to $1,672.78 an ounce by 5:28 p.m. in London. The Standard & Poor’s GSCI gauge of 24 commodities added 5.2 percent this year and the MSCI All-Country World Index of equities rose 5.2 percent. Treasuries are down 1 percent, a Bank of America index shows.
Gold jumped about 90 percent since December 2008 as the Federal Reserve expanded asset purchases in three rounds of so-called quantitative easing. While Fed minutes released Jan. 3 showed some policy makers favored ending $85 billion in monthly bond purchases this year, the central bank signaled Jan. 30 it will maintain its stimulus program to sustain growth.
“Against any sensible benchmark gold still appears significantly overvalued relative to the long run historical experience,” Kendall said in the report. “With global growth now improving and inflation expectations contained, we feel that downside risks are building for gold.”
Bullion will average $1,740 an ounce this year and $1,720 in 2014, before dropping to $1,500 the following year, Credit Suisse said in a report yesterday. That compares with an average of $1,669 last year, the most ever. Goldman said Jan. 18 that it expects gold to climb to $1,825 in the next three months, while restating a forecast for prices to peak this year and be weaker in the second half.
The metal is trading about 13 percent below the September 2011 intraday all-time high and failed to set a new record last year for the first time since 2007. It’s also yet to exceed previous all-time highs when adjusted for inflation, with its 1980 peak of $850 equal to $2,361 today, data compiled by the Fed Bank of Minneapolis show.
Investors own 2,612.3 metric tons through ETPs, about 0.8 percent below the Dec. 20 record and valued at about $140.3 billion, data compiled by Bloomberg show. Holdings are down 19.7 tons since the beginning of January after increasing every year since the first product was listed in Australia in 2003.
There are still signs that physical demand is improving. The U.S. Mint sold 150,000 ounces of gold coins last month, the most since July 2010, data on its website show. Nations from Brazil to Iraq to Russia are buying metal to add to reserves and the London-based World Gold Council estimated in November that 2012 purchases will probably total 450 tons to 500 tons.
Prices rose 7.1 percent last year, the smallest advance since 2008. It lagged gains in silver, platinum and palladium in 2012, metals that are used more in industry than gold. Since the end of 2011, bullion has traded in a $273 range.
“Given its historical role as a store of value, it was not surprising that investor demand for gold increased substantially,” Kendall said in the report. “We feel that this sideways drift will turn into a modest downward trend over the course of this year.”