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Gold to drop in Q1, far from retesting record high

Last Updated: Sunday, December 18, 2011 - 23:25

New York: Gold prices will fall below USD 1,500 an ounce over the next three months and are unlikely to retest September's all-time highs until later 2012 at the earliest, according to a media poll of 20 hedge fund managers, economists and traders.

The bleak forecast, coming after gold has lost 11 percent of its value so far this month, is likely to fuel fears that bullion is close to ending its more than decade long bull run and entering a bear market.

Almost half of respondents predicted bullion will fall to 1,450 an ounce in the first quarter next year, with three seeing prices as low as USD 1,400 an ounce.

The forecasts come after a dismal performance last week when prices hit a 2 1/2 month low of USD 1,560 and gold lost its safe haven status.

Selling was fuelled by a scramble by hedge funds for cash to meet client redemptions at the end of a difficult year and a run for cash by European banks seeking to raise capital.

"What is surprising is that in an environment where headline risk news is bigger than ever, gold has actually fallen from its highs," said Christoph Eibl, CEO and founding partner of the Swiss commodity hedge fund Tiberius.

"We believe that, in 2012, of all metals gold will be the worst performing," Eibl said.

The market eked out small gains on Friday to trade just under USD 1,600, but showed little sign of strength even after a small bout of short covering took other financial markets higher.

The precious metal is now heading for its first quarterly loss for the fourth quarter after its second-worst rout since September 2008 when the global credit crunch was at its height.

In another immediately bearish sign, US Commodity Futures Trading Commission (CFTC) figures released on Friday showed that managed money in gold futures and options cut bullish bets for the second consecutive week.


The long-term outlook is no more upbeat either, with more than half of respondents predicting that gold is unlikely to stage another run to new all-time highs until at least the second half of 2012.

Four said they don't expect a new record until at least 2014.

Bureau Report   

First Published: Sunday, December 18, 2011 - 23:25
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