Gold Bullishness Toned Down In 2013?

Gold Bullishness Toned Down in 2013?2013 arrived on the heels of gold's dismal performance in the last quarter of 2012. Now, regardless of the takeaway from 2012, many are asking the same question that arises at, if not before, the turn of each new year: how will gold perform?

At the start of 2012, some market participants forewarned that gold's performance was likely to be more moderate than in the past — and it was. While forecasts for 2013 tend to call for higher annual gold prices, many forecasters are again, directly or indirectly, toning down bullish sentiment.

Under the common school of thought, gold should have rallied during Q4 2012. That time period brought fresh announcements of US monetary policy in September and December, as well as much ado about the uncertainty and risks surrounding the US presidential election and the fiscal cliff. Added to those factors were other macroeconomic concerns and geopolitical risks in the Middle East. It was certainly a time when safety seekers and currency doubters should have been flocking to their preferred havens. Yet gold's performance was less than stellar. It should come as little surprise then that gold has started the first quarter of 2013 in a lackluster state.

That raises the question of whether gold will prove resilient and re-emerge as star performer or whether the market is losing some steam.

Some market participants have taken a highly bullish stance. Morgan Stanley has forecast an average 2013 gold price of $1,853 and named the yellow metal one of its most preferred commodities for the year.

Morgan Stanley foresees QE3 and European Central Bank purchases continuing to weigh on the dollar, which in turn will strengthen gold. It also views low nominal and negative real interest rates, geopolitical risk in the Middle East and mine supply issues as supportive. The firm expects to see a recovery in Indian demand as the country becomes more accustomed to higher prices