Gold Price Declines, Analysts Divided on Outlook

GOLD PRICE NEWS – The price of gold turned lower on Thursday amid widespread weakness in precious metals.  The spot gold price fell by as much as $22.03, or 1.3%, to $1,664.27 per ounce in morning trading, but subsequently pared its losses on its way back to the $1,672 level.  Today’s sell-off in gold prices occurred despite a lack of strength in the U.S. dollar, which hovered near unchanged against a basket of the world’s other most-traded currencies.

Silver underperformed the price of gold as it tumbled by $0.68, or 2.1%, to an intra-day low of $31.62 per ounce.  However, gold’s sister precious metal also recouped a portion of its losses to trade back to near $31.90 later this morning.  Among other metals, platinum futures dropped by 0.3% to $1,686.40 per ounce while palladium inched lower by just 0.1% to $725.70 per ounce.

Gold and silver stocks fared worse than the gold price as well this morning, as the Market Vectors Gold Miners ETF (GDX) retreated by as much as $0.68, or 1.5%, to $43.88 per share.  Notable gold stocks in the red included GDX components Agnico-Eagle Mines (AEM), Kinross Gold (KGC), and Silver Wheaton (SLW).  Shares of AEM fell by 1.8% to $48.45, KGC by 2.2% to $9.28, and SLW by 1.7% to $35.68.

The gold sector also lagged the broader equity markets, as the S&P 500 Index advanced by 0.4% to 1,500.79.  In doing so, the benchmark U.S. equity index surpassed the 1,500 level for the first time since December of 2007.

While the price of gold has advanced in each of the past two weeks, today’s decline brought the yellow metal back toward the midpoint of the trading range it has occupied since early December.  Furthermore, the gold price remains over 13% below its all-time record high of $1,923 per ounce – reached in September of 2011.  As a result, investment strategists across Wall Street remain divided on the outlook for the yellow metal.

Natixis analyst Nic Brown cautioned recently that “The danger for gold is that if prices are not seen to be trending ever higher, for a lot of holders of gold, that takes away all the rationale for holding it.  In that case, not only are there a lot of people who are not going to be buying it, but some of the people who’ve been sitting on it for the last few years may be looking to get out.”

In contrast to Mr. Brown, analysts at Morgan Stanley offered a more constructive view on gold prices moving forward.  Although the firm lowered its 2013 average gold price forecast by 4% to $1,773 per ounce, it reiterated its longer-term bullish outlook, noting that the price of gold may reach $1,845 in 2014.

In a report to clients, Morgan Stanley wrote that “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.”

The firm added that “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.”