Thursday, October 10, 2013

Morgan Stanley Sees Gold Lower in 2014 as Goldman Says Sell

Gold bars stackedFor Bloomberg, Glenys Sim writes:  Gold will extend losses into 2014 amid expectations the Federal Reserve will pare stimulus as the U.S. recovers, according to Morgan Stanley, adding to bearish calls from Goldman Sachs Group Inc. and Credit Suisse Group AG.

“We recommend staying away from gold at this point in the cycle,” Melbourne-based analyst Joel Crane said in a video report received today. Bullion will average $1,313 an ounce in 2014, down from the $1,420 forecast for this year, Morgan Stanley said in its quarterly metals report on Oct. 7.

Bullion is heading for the sixth weekly loss in seven and investment holdings are shrinking even as U.S. lawmakers wrangle over the debt ceiling and budget, seeking to avert a default and end a government shutdown. Gold is a “slam dunk” sell for next year because the U.S. will extend the recovery after lawmakers resolve the stalemate, Jeffrey Currie, Goldman’s head of commodities research, said this week. The political deadlock in Washington is a “farce,” according to Marex Spectron Group.

Currie Jeff Goldman raider(Image: Jeffrey Currie, Goldman Sachs)

“Our forecast profile heading into next year is relatively flat against our expectations of rising real interest rates and the U.S. dollar,” Crane said in the video. Bullion will average lower every year through 2018, Morgan Stanley forecasts.

Bullion, which has averaged $1,453 in 2013, is heading for the first annual loss in 13 years after dropping 22 percent. The price tumbled to a 34-month low of $1,180.50 in London in June on expectations that the Fed would taper the $85-billion-a-month of bond buying. Gold traded 0.5 percent lower at $1,299.17 at 5:37 p.m. in Singapore, dropping for a third day.

Fed Minutes

Not everyone is bearish. While gold may look weak fundamentally, “in this sort of environment, you can make a strong argument that gold isn’t too bad a thing to hold,” said Kevin Norrish, head of commodities research at Barclays Plc. “I don’t think it’s a slam dunk short by any means,” he said yesterday. Short bets are wagers on declines. Norrish Kevin Barclays (Image: Kevin Norrish, Barclays)

Most Fed policy makers said that the central bank was likely to taper its bond purchases this year, even as they unexpectedly refrained from such a move in September, according to minutes of their last meeting released yesterday.

Deverell Ric Credit SuisseRic Deverell, Currie’s counterpart at Credit Suisse, said on Oct. 8 that selling gold is his top recommendation for trading in raw materials in the next year. Deverell said in May that bullion was going to get “crushed.”

(Image left: Ric Deverell, Credit Suisse)

 

ETP Holdings

Investors sold 711.8 metric tons from bullion-backed exchange-traded products this year, erasing more than $61 billion from the value of the funds. Holdings fell to 1,920.2 tons on Oct. 8, the least since May 2010, according to data compiled by Bloomberg. Assets are down 27 percent in 2013 after climbing every year since the first product was listed in 2003.

House Republican and Senate Democratic leaders are open to a short-term increase in the debt limit, according to congressional aides of both parties, who spoke on condition of anonymity. President Barack Obama has already said he could accept a short-term deal without policy conditions.

“Tapering has been postponed not canceled, and is expected by year end,” Morgan Stanley analysts wrote in the Oct. 7 report. “We also expect the political stalemate in Washington to be broken before the debt ceiling is breached. Consequently, we see little immediate upside to the gold price either in the immediate future or next year.”

To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

GGR comment:  Already short Currie talking his book, again.  He was "right" last time, in March/April.  Is he right again? 

Our sense is that when high profile traders "go to the well" a second or third time they have higher risk, especially when they press using terms like "slam dunk sell" or "no brainer."  Currie's reliance on  and Goldman's belief in an 'improving U.S. economy' gives us the core context of their gold bearish view.  In other words, hang the huge global monetary inflation, the central bank printing party is still going! 

We urge Mr. Currie to be sure and mind his stops. 

We certainly will. 

Source for the original piece: Bloomberg

http://www.bloomberg.com/news/2013-10-10/gold-seen-lower-in-2014-by-morgan-stanley-as-goldman-says-sell.html

(Open source images added.)


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Trading gold, silver and mining shares since 1980 with a focus on taking advantage of volatility extremes, Gene Arensberg analyses the markets through a basket of technical and fundamental indicators and shares his findings from time to time here at Got Gold Report. Mr. Arensberg has been quoted in the Wall Street Journal, Dow Jones MarketWatch, USA Today and dozens of other news organizations.

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