JPM and Goldman See $1,800/oz Gold By Year End – Iran, Middle East and Inflation Risks Cited

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XAU/EUR Exchange Rate Daily - (Bloomberg)

Gold at €1,355/oz, just 2.5% from the record high of €1,390/oz, is a sign of a continuing lack of trust in the euro and in Draghi’s stewardship at the ECB.

Investment and diversification demand for gold remains robust as seen in the gold holdings in exchange-traded products or trusts rose to a record for a second straight day. The amount increased 2.85 metric tons, or 0.1 percent, to 2,470.67 tons, data tracked by Bloomberg showed.


G21 Gold Price Daily - (Bloomberg)

Research houses, analysts and banks are revising their estimates for year end 2012 gold prices higher.

They believe that concerns about inflation and demands for gold as a store of value should lead to higher gold prices by the end of 2012.

JP Morgan and Goldman Sachs have overnight revised upwards there year end forecasts to $1,800/oz and $1,840/oz respectively.

JPMorgan said in a note that it expects gold to move toward $1,800/oz by year end, citing negative real interest rates in the U.S., sovereign risk in Europe and instability in the Middle East. 

Goldman Sachs sees gold at $1,840/oz by end-2012.  Goldman cite the supply side fundamentals and monetary policy easing which are very supportive. 

So said Jeffrey Currie, head of commodities research at Goldman in an interview with Linzie Janis on Bloomberg Television.

Currie believes monetary policy easing and FOMC pursuing QE3 “will be critical to putting upward pressure on gold prices”. 

Goldman remain most bullish on oil as a trade due to supply issues and the “situation in Iran”.


XAU/GBP Exchange Rate Daily - (Bloomberg)

Bank of America Merrill Lynch said that gold may reach $2,000/oz by yearend.

Bank of America Merrill Lynch analysts Sabine Schels and Michael Widmer said in an email report that gold prices may climb to $2,000 an ounce by the end of the year because the Federal Reserve probably will announce a third round of bond buying.

“Loose monetary policies with a scope for more aggressive balance-sheet use in the U.S. and Europe will keep real rates in most reserve currencies low (or negative) in 2012,” the analysts said. “We continue to believe this will allow investor demand for gold to remain strong.”

Separately, Australia & New Zealand Banking Group Ltd. said there are “upside risks” to its forecast for gold to end the year at $1,720 an ounce. Commenting in a report today, they said that “gold prices are set to continue their rally, and the increasing likelihood of policy action is creating upside risks.” 

Capital Economics see gold rising to $2,000/oz due to demand for gold as a protection of wealth.

The Capital Economics forecast is interesting as they are conservative and were quite bearish on gold up until relatively recently.  

Capital Economics remain bearish on silver and say silver will end the year at about $32 an ounce.

We differ with them regarding silver which we remain bullish on in the medium and long term and believe the inflation adjusted silver high of $150/oz will be reached in the coming years.

A close above $1,700 today could lead to a sharp move to challenge the next psychological resistance at $1,800/oz.

Given the now strong technical and strong fundamentals $1,800/oz and €1,400/oz gold could be seen as soon as this month – rather than by year end.