Morgan Stanley has a current gold price forecast for 2012 of $2,200 an ounce based on more stimulus from central banks, in particular the Federal Reserve, as well as a normalization of gold lease rates. Gold lease rates had trended into negative territory, a 22 year low, as demand surged to use gold as collateral for U.S. dollar loans. As liquidity needs ease in Europe and as more European banks access the U.S. dollar swap line put in place by central banks, the pressure on gold may ease.
Barclays Capital has revised its price target for gold based on the Fed's recent moves. The firm's first year half average is currently $1,775 an ounce while its second half average could rise to as much as $1,975 an ounce. Barclays says gold could still see spikes to $2,200 as well as corrections reflecting gold's battle between a stronger U.S. dollar and soft physical buying versus strong investment demand and central bank buying.
Bank of America/Merrill Lynch sees gold prices averaging $1,850 an ounce in 2012, with a high of $2,000 driven mainly by more quantitative easing from the Federal Reserve and European Central Bank. The firm expects $600 billion and 500 billion euros worth of new money to be pumped into the system, respectively. "We expect gold prices to rise by 16%, or $275, over the next 12 months.
James Steel, analyst at HSBC Securities, lowered his average gold price target to $1,850 from $2,025 an ounce, but Steel expects a wide trading range where gold could pop to $2,050. "Any shift in focus from the eurozone to the U.S. and its fiscal problems would be likely to benefit bullion," wrote Steel in a note. However, deflation scares and deleveraging will limit gold's rally.Jon Nadler, senior analyst at Kitco.com, thinks gold prices will more likely see $1,000 an ounce before $2,000 an ounce. "The question will remain for 2012 to what extent will investment demand be able to remain the principle driver and continue to attract interest from speculators and investors," a shaky prospect after last week's carnage. Nadler thinks gold might need a significant period of consolidation, perhaps 2-3 years, to regroup. He also thinks its possible for the Federal Reserve to start raising interest rates earlier than its mid-2013 target. GFMS, an independent research consultancy owned by Thomson Reuters, thinks that gold prices could peak at the end of 2012 or beginning of 2013. In its 2011 Gold Survey report, GFMS forecasts a volatile year for gold prices with gold sinking as low as $1,600-$1,550 an ounce, averaging out at $1,760, and perhaps spiking to $2,000 an ounce. But then the party is over. "We think the peak would be towards the end of this year or maybe in the first half of next year," says Neil Meader, research director at Thomson Reuters GFMS. The end to gold's 10-year bull run would come with a renewed faith in currencies as the structural imbalances that have impeded paper money slowly start to fade. "One overt trigger that is worth looking for is the start of a serious ratcheting up in interest rates because for gold investment to be popular you do need very low interest rates," says Meader. Now that you've seen what the experts have to say, we'd like to hear your thoughts on where you think gold prices will finish in 2012.
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