Analysts Stick to Bearish Gold Outlook; Morgan Stanley and Goldman Sachs Firm

by on January 23, 2014 5:41 am BST

Analysts continue to hold their bearish views on gold on the basis that continued gains in global equities will dwindle the need for so-called “safe haven” assets. Morgan Stanley and Goldman Sachs remain bearish as gold still remains under pressure. According to analysts Joe Crane and Peter Richardson, gold is targeted to drop 12 percent to $1,160 per ounce and another 13 percent to $1,138 per ounce as the global economic climate continues to improve.

There is “more pain” for gold bulls as the analysts’ report said ““price performance will continue to suffer as long as risk assets in general and U.S. equities in particular continue to perform strongly, undermining the need for portfolio managers to hold more than a modicum of safe-haven assets.”

Goldman Sachs still remains bearish on gold and overweight on equities (the firm said there are no asset bubbles) with a target of $1,150 per ounce within the next 12-months. Morgan Stanley realizes the divergence in physical and paper gold suggesting that the Chinese demand will not perk up gold as investors continue to sell gold-backed exchange-traded products (ETPs), which had the worst year of their decade existence in 2013. Morgan Stanley, also, said the increase regulator activity in gold-fixing is driving the largest investment banks to cut commodity divisions and trading activity. “Mounting regulatory pressures on investment banks operating in commodity markets, with an anticipated reduction in large-scale speculative activity and turnover, have also been increasingly reflected in lower gold prices,” said the firm.

I still hold firm on my bearish gold target of $1,038 per ounce between the first and second quarter this year. The overall optimism in global growth and equities will grind higher. Acknowledging several factors, the equity markets may run out of gas by mid-to-late summer if the economic climate does not continue to accelerate. When this happens, gold is likely to rebound significantly.