Investment banks cut gold price as Dubai conference predicts gains

More than six in 10 delegates to the latest Dubai Precious Metals Conference voted for gold hitting $3,000 by 2014, although investment banks such as UBS and Goldman Sachs have cut their price forecasts in recent days.

At the conference 63% voted for the higher price, with those debating the change arguing that continued high debt to GDP levels in develped countries, particularly the US, support the thesis that prices will continue to rise, despite a gain of more than 600% in the past decade.

Some 37% of delegates voted for a price fall to $1,000 by 2014. Last year, in April 2012, the conference heard forecasts of gold hitting $3,500-$4,000.

Meanwhile, UBS, Goldman Sachs and Deutshce Bank have all cut their 2013 price outlook in recent days.

UBS cut its 2013 price to $1,740 from $1,900 citing factors such as a more benign outlook for the US economy amidst ongoing quantitative easing measures by the Federal Reserve. A strengthening of the dollar would push the gold price down. UBS has maintained a $1,700 forecast for 2014.

Deutsche Bank is reported to have cut its gold forecast to $1,637 for this year, and $1,810 for 2014. It also cited the impact of a stronger dollar.

Goldman Sachs has lowered its three-month forecast to $1,530, its six-month forecast to $1,490, and its 12-month forecast to $1,390. It said the reasons for holding gold – such as a hedge against market risk in the US and Europe – were weakening, and that the traditional use of gold as an inflation hedge would likely be some years away because of the current expectations around inflation rates.

The latest price adjustments come at about the same time that the gold market marks the 80th anniversary of the decision by US president Franklin Roosevelt to confiscate gold.

An explanation of FDR’s actions has been published by Bloomberg TV, below:


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