Top Gold Forecasters Stick With Bear Call on Fed OutlookDebarati Roy
Gold’s most-accurate forecaster is sticking with his bearish outlook even after Federal Reserve officials cut their outlook for interest rates.
Artur Passos, who produces the metals outlook at Itau Unibanco Holding SA, said his view on gold hasn’t changed after the central bank this week signaled a slower pace of monetary tightening. Higher borrowing costs cut gold’s allure because the commodity generally offers returns only through prices gains.
“We are still seeing rates rising this year, and still see further downside pressure on prices,” said Passos, who is part of a research group led by former central banker Ilan Goldfajn and was the most-accurate among 20 gold forecasters over the past two years, data compiled by Bloomberg Rankings show.
After erasing its 2015 gains earlier this month on the outlook for higher borrowing costs, bullion jumped the most in six weeks on Wednesday as the Fed said economic growth had “moderated somewhat” and inflation remains below the desired level. Passos isn’t alone in predicting that the renewed gold excitement won’t last. Barnabas Gan, the most-accurate forecaster for all precious metals over the past two years, also expects prices to fall.
Gold for immediate delivery traded at $1,170.92 an ounce from $1,171.18 on Thursday, heading for the first weekly advance this month, according to Bloomberg generic pricing.
Prices jumped 1.6 percent on Wednesday, the most since Jan. 30, after the Fed cut its estimate for where the benchmark U.S. interest rate will be by the end of 2015. There were signs the enthusiasm was fading, with prices falling as much as 0.7 percent Thursday. The central bank officials also dropped a pledge to be “patient” in tightening policy in a statement after concluding a two-day meeting.
Passos confirmed in an e-mail Thursday that he’s sticking with his forecast for prices to post a third straight annual decline in 2015 and that the metal will reach $1,100 by the end of the year.
Gan, an economist at Oversea-Chinese Banking Corp. in Singapore, maintained his forecast for a drop to $1,000 by the end of this year. That would be the lowest since 2009.
While Fed Chair Janet Yellen said removing the Fed’s commitment to patience “doesn’t mean we are going to be impatient,” a rate increase in June can’t be ruled out. That contrasts with policy makers around the world who are lowering borrowing costs and buying bonds to stimulate their economies.
“The Fed made it clear that an increase in the Fed rate, while unlikely in April, could be warranted at any later meeting,” Gan said in an e-mail Thursday. The outlook for muted inflation will also pressure gold, traditionally seen as a hedge against rising consumer costs, he said.
The dollar rebounded Thursday, climbing as much as 1.5 percent against 10 major peers, on speculation that U.S. borrowing costs will rise as other economies stick with monetary easing.
“The Fed statement points to a firm-dollar environment and a weak gold price,” Gan said. “We see lower prices for gold.”