HardAssetsInvestor

Written by Sumit Roy  |

January 18, 2012

Precious Metals Monitor: Major Analysts Decisively Bullish On Gold In 2012

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We take a look at the latest gold price forecasts from the major analysts.

Gold prices continued to creep up over the past week, but the rally that began at the start of the year has slowed. Prices are stalling just under a downward trend line that connects the record high of September with the rebound high of November.

A break of the trend line at $1650-$1660 would confirm the recent uptrend and be interpreted as very bullish.

Likewise, silver is facing similar resistance near $30.50, but the metal’s recent rebound looks weak in the larger context. Prices sold off almost 50 percent peak-to-trough since peaking last spring, putting the metal firmly in a bear market. Until prices rebound above $35, rallies should be considered corrective within the larger downtrend.

Meanwhile, the analyst community remains overwhelmingly bullish when it comes to gold in 2012. Respected precious metals consultant GFMS came out Tuesday with its call for $2000/oz gold within the next year.

"Concern over nearly all currencies’ long-term value remains acute, and this includes the dollar, which to a large extent has found favor simply as the ‘least bad’ option, especially in light of growing fear over the break-up of the euro zone," the firm said.

But while GFMS is bullish this year, it is bearish thereafter, saying: “... the gold market is nearing the closing stages of its decade-long bull run and, once the macroeconomic backdrop changes and investment in gold fades — probably sometime next year — a secular retreat in the price will unfurl."

That’s quite a controversial view. Indeed, most analysts remain bullish on gold for the foreseeable future. Goldman Sachs has a 12-month target price for gold of $1940.

“Our view on gold is driven by our view on underlying real interest rates,” Goldman said. “It is the sharp drop in price that makes it more attractive.”

Morgan Stanley cut its gold price forecast substantially today to $1845 from $2200, but that’s an average price for the year.

“We still anticipated significantly annual increases in gold and silver prices in 2012 from strong investment demand,” said Morgan Stanley. “The safe-haven appeal is expected to continue despite a strengthening dollar.”

One of the highest targets for the year comes from Citigroup, which sees an almost 50 percent increase in prices.

“Unless and until we see a weekly close below $1,535, we believe the uptrend in gold has resumed and a move to $2,400 throughout the course of this year is on the cards,” said Citi analyst Tom Fitzpatrick.

On Monday, Credit Suisse lowered its price forecast for gold, but maintained a bullish view. The firm now sees the yellow metal averaging $1755 this year.

Meanwhile, Germany’s Deutsche Bank has a gold forecast of $1825: “… we view underlying fundamentals as still bullish,” the bank said. "The persistence of negative real interest rates will sustain the appeal of holding gold, in our view. We also expect central bank gold buying will continue and that tail event risk as it relates to the European sovereign debt crisis and the European Central Bank's balance sheet will encourage gold prices to recover."

In aggregate, analysts remain bullish on gold. Most see the metal advancing anywhere from $1800 to upward of $2400 this year, which would be a very respectable gain from the 2011 closing level of $1564.