Gold set to languish after 2013 price slide

Analysts have slashed their 2013 gold and silver price forecasts after sharp falls earlier this year and expect them to remain weak in 2014 as the United States reins in monetary stimulus, a Reuters poll showed on Monday. For the full year, spot gold is expected to average $1,410.75 an ounce, 13 percent below the average forecast of $1,627 at the time of the last Reuters poll in April.
Nonetheless, price views for the second half suggest gold's latest slide may have bottomed out for now after it hit its lowest in nearly three years last month, according to the survey of 30 leading analysts and traders conducted in July. Hints that the US Federal Reserve will roll back its quantitative easing programme, which helped send gold to record highs in 2011 by keeping interest rates low and stoking fears of inflation, have knocked prices down 21 percent this year.
The April forecast was considered bearish at the time, because it suggested average gold prices could fall for the first time since 2001 from $1,668 an ounce last year. "In Asia there is still appetite for gold, but Western world institutional investors, we think, will be more interested in other markets," Deutsche Bank analyst Michael Lewis said. "The dollar is going to be a problem, and our bullish equity view will also limit the inflows going into gold."
Analysts' expectations for the metal were knocked sharply lower by a price slide of $200 an ounce over two days in April and a similar-sized drop over two weeks in June. Nonetheless, the poll suggested gold prices have bottomed out for now and will average $1,310 an ounce in the second half of the year, close to current levels, and remain in the same region next year at an average of $1,331 an ounce.
"It is reasonable to look at the market and say prices where they are now are about right," Nic Brown, Natixis' head of research, said. The average silver price forecast for the full year was cut to $23.82 an ounce from $30.02 an ounce in April. In the third quarter prices are expected to average $20.50, before recovering to $21.00 by the last three months of the year. In 2014 they are expected to post a decline for a second year to an average of $21.78 an ounce. Although it has a strong industrial demand base, the record prices seen in recent years were driven largely by investors who bought the metal as an alternative to gold.