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Click here to watch the video with Rohit Savant complete with the artcile below.
Just a couple of weeks ago we had a piece up here on ResourceSpots.com which outlined the primarily bullish outlook for gold in 2013. We saw speculation that the price of gold would jump as high as $2500, but in an interview with Kitco, senior commodities analyst at CPM group Rohit Savant urges investors to temper their expectations.
“Our view on gold is pretty much still the same as what we had last year, which is that we expect gold prices to soften somewhat this year in relation to where they were last year. We actually have a gold price average of about $1650 for 2013, which is about a percent and a half lower than the average for last year.”
Now this, while perhaps a bit low, its not really that much of an aberration to the median price prediction from before. The interesting part of the interview comes below.
“ What we think would hurt gold prices this year would be the price of the metal. What we think is that investors…have been price sensitive and are unlikely to step in as buyers at high levels. Instead we think that they probably wait for them to soften before they step in and buy. For example in the first week of this year we saw gold prices come off, and we didn’t really see a positive response coming in from ETFs or American Eagle coin sales. The premiums on those coin sales were actually down in the first week of the year. The net additions to gold ETF holdings was down compared to where it was at the end of 2012, so looking at those factors what we think is that investors would probably want to see gold prices decline further before they actually step in as buyers.”
So it seems to Savant that the actual rise in value of the physical metal is actually hurting the demand. He posits that it has reached the point of being prohibitively expensive, and really how is it that hard to believe? Gold’s run has been unprecedented in recent years and to expect it to continue in a straight line indefinitely is foolish, regardless of the gloomy outlook of the global economy. It is to that point that Savant speaks on next:
“What’s been happening over the past several months now is that investors are backing away from this constant fear that’s been fed into the market about how the global economy would collapse, and how the financial markets would collapse…that’s something that’s been in the market now for a couple of years which really was driving investors towards gold. You saw that more strongly in 2011 and to some extent in the early parts of 2012, but…investors have realized that is unlikely to happen. A lot of these problems do exist, of course, but they are structural issues which would take a long time to be resolved and there’s no real expectation any more of this so-called collapse in the financial markets. So (investors) see these as problems, and…gold would be a good investment in the long-term, but there’s no reason for them to rush into it and buy these at high prices or in a rising price environment.”
“The debt ceiling, like many of the other issues that the global economy is faced with, is one of those longer-term structuring problems, especially of the developed economies. That’s why I’m saying that investors are still interested in gold, but they’re not as fearful of the debt ceiling or any of these other issues as they had been in 2012 or 2011. The debt ceiling this time around, for the same reasons that investors have been backing away from buying gold in a rising price environment, what you’re probably going to see is [that] the debt ceiling talk will be supportive of gold prices but (are) unlikely to push up sharply the way it did in 2011.”
This point is extremely interesting to me. For those that visit these parts of the internet regularly, you are constantly confronted with doomsday scenarios that treat the global economic collapse as all but a foregone conclusion. The euro zone disaster! The debt ceiling! The fiscal cliff! It’s all coming to an end!
What Savant says here is that investors are done listening to it. He’s not saying that there aren’t major structural issues in the economy, in fact he says that the price of gold long-term is still looking positive, however he sees the community souring on the fear mongering about global financial collapse.
What do you think? Is Savant right in his short-term (relative) bearish outlook on the precious metals?
By Steve Stransman exclusive to ResourceSpots.com