GFMS looks for a price bottom at around $1,200 and perhaps the start of a tentative new bull market in late 2015.
LONDON (MINEWEB) – In its latest update to its 2014 Gold Survey, Thomson Reuters GFMS sees gold as entering a period of recuperation, but holds out little hope for any short term price appreciation, with physical demand falling sharply in the first half of the year compared with a year ago. It sees last year’s substantial price falls as highly anomalous and talks of the market regaining its composure.
However the report will have been written ahead of the recent gold price collapse, down to a nine-month low yesterday following some heavy sales on COMEX after the release of the latest statement from the FOMC. (Although, given that it kept its ‘not for a considerable time’ wording for the likelihood of interest rate increases, and no other surprises on tapering, this might actually have been seen as gold positive.)
Indeed we foreshadowed this reaction on Mineweb as a follow-on from a pattern seen in previous FOMC statement gold price reactions whether they were generally seen as gold positive or no.
GFMS reckons the Asian markets over-bought gold during the 2013 price falls and this has affected purchases which otherwise might have been made this year. And there is also a suggestion that overbought gold may have meant inventories had been built up to a level more than sufficient to meet demand atb the time and that these have been gradually run down following the Chinese New Year.
Thus we have seen quite a sharp demand downturn from China in particular, although this may well not have been quite as steep as some commentators have suggested. Indeed both Indian and Chinese demand appear to have been picking up again towards the end of the third quarter
Gold ETF sales volumes have been hugely less than they were in 2013 and Central Bank buying has been a little higher, as has been jewellery offtake, which should to an extent counter the fall-off in Asian demand in relation to 2013 figures. GFMS reckons this combination of factors should see more of a dynamic gold flow which will perhaps put a floor of around $1200 under the gold price. It is relatively close to that now after the post-FOMC fall sitting at a little over $1220 as I write, and given the gold price has fallen back by almost $100 in the past month, even the predicted $1200 floor looks vulnerable given COMEX trading patterns.
Rhona O’Connell, Head of Metals Research & Forecasts – GFMS at Thomson Reuters, who long term Mineweb readers may recall was a regular correspondent on the site before Thomson Reuters took over GFMS, has suggested a $1200 floor level as she feels that any fall to this mark is likely to stimulate physical interest in what she sees as highly price-responsive regions like the Middle East and Asia.
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