Gold futures inched higher Monday as U.S. markets were shut for the Martin Luther King Jr. holiday, and as Citigroup analysts cut their price target on the yellow metal for this year and next.
In electronic trade, futures for February gold were lately up $2.70 to $1,689.70 an ounce, after having closed last week with a gain of 1.6%.
On Monday, Citigroup cut its outlook on gold prices for this year by 4% to $1,675 a troy ounce, and by 0.2% to $1,653 a troy ounce for 2014. Its silver price forecasts remained unchanged.
“Indeed, gold’s recent struggle to sustain itself beyond the $1,800 technical resistance level despite seemingly conducive conditions such as record low interest rates and fiscal uncertainty has cast doubt onto the bullish case for gold among the investor community,” said the note.
The bank pointed out that central bank purchases for gold have fallen from their 2009 peak, while jewelry demand continues to fall, with private sector demand to potentially follow.
The outlook markedly diverges from the Thomson Reuters GMFS Gold Survey – which presented in Toronto last week.
Presented on January 16 by Thomson Reuters GFMS global head of metals analytics, Philip Klapwijk, the gold survey highlighted the market's fundamentals for calendar 2012, and provided a forecast for the first half of 2013, ahead of the 2013 survey that will be released in April.
Klapwijk noted that GFMS expects that, in spite of growing market speculation that the decade-long bull run for gold could be over, gold will average an all-time high over the first half of 2013.
“We think we could get a touch of $2,000 (per ounce) this year,” he said, adding that it is expected gold will settle in at about the $1,775-per-ounce range in the first half of 2013, “which is a bit more aggressive than the consensus”.
Klapwijk added that many of the factors that have underpinned gold's bull run to-date will carry over into this year.
“Although there is now growing speculation around the structure and longevity of the Fed's QE (quantitative easing) program, policies of ultra-low interest rates across the western economies will persist in 2013.
“This will continue to support investor interest in gold in the absence of low risk investments that can offer acceptable yields.”
World Investment in 2013 is forecast to rise by just over 20 per cent in volume terms and almost 30 per cent in value terms in comparison to the gold survey’s report of 1,164 tonnes and $87 billion in 2012 - an all-time high.
Klapwijk noted that in terms of gold demand, 2013 may be a turnaround year for India, as many days in its 2013 calendar are believed to be very “auspicious for marriage”, so there is expected to be a rise in the number of weddings, leading to higher demand for gold jewelry.
Looking ahead, Klapwijk said that he thinks a potential downgrade of the U.S. credit rating is an important factor in the year-ahead for gold, as it would boost investment in the yellow metal.
“This has been very underplayed by the analytical community,” he suggested.
Citigroup also Monday increase its platinum price outlook by 1.5% to $1,700 an ounce for 2013, as it expects demand to outstrip supply by 94,000 ounces this year. This is a result of reduced supply from South Africa amid strife and improving demand from the autocatalyst sector.