RE: News on Klondex Mines June 24, 2013, 4:05 a.m. EDT
Goldman cuts 2013, 2014 gold forecasts
By Francesca Freeman
"Goldman Sachs GS-0.75% Monday cut its outlook on gold prices for this year and next, citing growing price risks from a brightening U.S. economic picture.
The bank now expects gold to end this year at $1,300 a troy ounce, down 9.4% on its previous forecast. It sees gold ending 2014 at $1,050 an ounce, down 17.3% on its earlier outlook.
"Medium term, we expect that gold prices will decline further given our U.S. economists' forecast for improving economic activity and a less accommodative monetary policy stance," the bank said. "Further, with quantitative easing tapering likely to start soon, perhaps even a bit sooner than previously anticipated, we are fast forwarding on our real rate path."
Gold is traditionally viewed as a safe store of value at times of weakness in the wider market, and is sought as a hedge against inflation and currency debasement at times of loose central bank monetary policy. The price of gold plunged 6.3% in a single session last week after U.S. Federal Reserve Chairman Ben Bernanke said the U.S. central bank could start winding down its $85-billion-a-month bond-buying program later this year. He also said the bank could even cease the purchases next year if growth picks up, as the Fed projects, unemployment comes down and inflation moves closer to the central bank's 2% target. The Fed's bond-buying program has been a major support to gold prices in recent years.
Purchases of gold by central banks, meanwhile, "will not be sufficient to offset this decline in prices," said Goldman Sachs.
Central banks in emerging-market countries have increased their gold holdings over the past few years in reaction to the sovereign-debt crises affecting reserve currencies like the U.S. dollar and the euro. This has helped shore up gold prices by absorbing supply.
Lower gold prices should prompt producers to scale back production of the metal, however, and prices should therefore find longer-term support at the $1,200 an ounce level, said the bank.
At 0839 GMT, spot gold was down 1.1% at $1,283.40 a troy ounce."