Gold is forecast to drop 13 percent this year and extend losses into 2014 as investor holdings tumble amid speculation that the Federal Reserve will reduce asset purchases, according to Australia’s government forecaster.
Prices may average $1,444 an ounce in 2013 and $1,340 in 2014 from $1,668 last year, the Canberra-based Bureau of Resources and Energy Economics said in a report. The forecast for this year compares with an estimate in March for an average price of $1,638 in 2013. Since January, spot bullion has averaged about $1,530, according to data compiled by Bloomberg.
Gold has plunged 26 percent this year, entering a bear market in April, after some investors lost faith in the metal as a store of value. Fed Chairman Ben S. Bernanke said this month that the central bank, which buys $85 billion of Treasury and mortgage debt a month, could trim purchases this year and end the program in 2014 should the U.S. economy continue to improve.
The price drop “may be attributed to a change in investor sentiment towards gold in response to indications that the U.S. Federal Reserve may end its quantitative-easing program earlier than expected,” the bureau said. That change “contributed to a capital outflow from gold into other asset classes,” it said.
Gold for immediate delivery dropped as much as 2.6 percent to $1,244 an ounce, the cheapest since September 2010, and was at $1,247.27 at 11:25 a.m. in Singapore. It’s heading for the worst quarterly drop since 1920.
Holdings in the SPDR Gold Trust, the world’s largest exchange-traded product backed by bullion, fell to 969.5 tons yesterday, the lowest since February 2009, according to data compiled by Bloomberg.
Gold output in Australia, the world’s second-biggest producer, may increase to 263 tons in the year starting July 1 from 252 tons this year. Exports may reach 304 tons in 2013-2014 from 281 tons a year earlier.