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HSBC Holdings plc has cut its gold and silver price forecast for 2013 and 2014 on late Monday. HSBC has listed five reasons for its downward revision to gold and silver prices.

25 Jun 2013

NEW YORK (Commodity Online): HSBC Holdings plc has cut its gold and silver price forecast for 2013 and 2014 on late Monday.

HSBC has listed 5 reasons for its downward revision to Gold and Silver prices:

--First, the discussion by the Fed of a tapering, or reduction, of its quantitative easing (QE) asset purchases was more aggressive than we initially envisaged, and has resulted in higher United States Treasury yields, which are traditionally negative for gold and silver.

--Second, turmoil in emerging markets and the prospects of lower growth in China have weighed on bullion. HSBC economists cut their forecast of 2013 Chinese gross domestic product to 7.4% from 8.2% and 2014 GDP forecast to 7.4% from 8.4%.

--Third, a slowdown in China’s GDP growth may reduce consumer appetite for physical gold in that country.

--Fourth, HSBC’s bullish USD view implies more gold weakness ahead….

--Fifth is lackluster demand.

The British bank has trimmed its 2013 gold price forecast from $1,542 to $1,396 an ounce and silver forecast from $26 per ounce to $21 an ounce.

HSBC also cut its average gold forecast for 2014 to $1,435 from $1,600 previously and silver forecast to $20 from $27 an ounce.

As of 9:30 am New York time, the most active August gold contract on the Comex division of the New York Mercantile Exchange was traded up $8.80 at $1,285.90 an ounce. Spot gold price was last quoted up $4.40 at $1,287.50. July Comex silver was traded up $0.222 at $19.715 an ounce.

According to the bank, the metals to remain under pressure due to expectations for tapering of the Federal Reserve’s quantitative easing program and emerging-market weakness. For the remainder of the year, HSBC forecast a $1,125-$1,375 trading range for gold and a $16-$22 range for silver.

HSBC also added that a positive physical demand response to lower prices will eventually cushion gold’s drop, but doubts that it will be of the magnitude of the reaction after the April price decline.

“Price-sensitive buyers may wait for a well-defined bottom before entering the market. Increased import duties and the Indian government’s efforts to reduce gold imports are curbing that nations’ demand for bullion and crimp jewelry demand,” they added.

“One supportive factor for gold has been increased central bank buying, as reserve mangers sought to diversify their foreign-exchange reserves. However, these reserves are now either falling or not growing as quickly due to declines in current account balances in many emerging-market nations as a consequence of the slowdown," HSBC added.

“Gold’s price action this year shows that despite declines, it remains a useful forecaster and barometer of wider financial market sentiment,” HSBC said.

“Gold’s decline began well in advance of the Fed’s announcement of quantitative easing tapering. Gold’s slide, it can be argued, was the ‘canary in the coalmine’ accurately predicting Fed tapering and the slowdown in emerging markets, notably China,” the British bank concluded.


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