Societe Generale sees gold below $1,000 by 2016
By Shawn Langlois and Carla Mozee, MarketWatch
MADRID (MarketWatch) — Gold prices suddenly shifted out of rangebound trading and pitched higher on Thursday after the European Central Bank cut interest rates and announced a clutch of other easing moves.
Gold for August delivery GCQ4 +0.68% jumped $10.20, or 0.8%, to $1,254.40 an ounce. July silver SIN4 +1.00% rose 23 cents, or 1.2%, to $19.03 an ounce. A day earlier, gold prices lost ground.
Gold saw mostly no reaction after rate cuts were announced by the ECB, but then as other measures were revealed at a press conference with ECB President Mario Draghi, the euro began to stumble EURUSD -0.47% against the dollar and gold rose. The central bank cut its main lending rate to 0.15%, a new low, from the 0.25% rate held since November, and dropped the rate on bank deposits parked overnight with the central bank to negative 0.10%.
At the ECB press conference, Draghi announced more measures aimed at encouraging lending. The euro zone has been struggling with low levels of inflation and sluggish economic growth. ECB live blog: After rate cuts, more expected from Draghi
He also said the central bank isn’t finished.
U.S. central-bank policy makers, meanwhile, are generally expected to raise their benchmark interest rate.
A bearish call came from Societe Generale on Thursday. Analysts said spot gold is likely to move “well below” $1,200 an ounce in 2015 and break below $1,000 an ounce in 2016, when the U.S. Federal Reserve could start to raise interest rates at a much faster pace than currently discounted by the market.
“We continue to recommend selling gold rallies, as we believe that gold is in a multiyear downtrend driven by the prospect of U.S. rate hikes,” said Michael Haigh, analyst at Societe Generale. “While we have revised higher our near-term gold forecasts, we remain very bearish over the medium and long term.”
Meanwhile, Commerzbank’s Axel Rudolph believes that there’s far too much pessimism regarding gold, and that could mean a big move is on the way.
“We believe that the current decline will end within the next couple of weeks because sentiment indicators show that around 90% of gold traders are bearish,” he said. “This is also what happened in late December, before a strong rally unfolded.”
A report on U.S. weekly unemployment claims showed the number of people applying for unemployment benefits up last week, but claims sticking near a post-recession bottom. Friday, of course, brings the U.S. nonfarm-payrolls report.
Elsewhere in metals trading, July platinum PLN4 +0.50% rose $1.70 to $1,435.60 an ounce, while September palladium PAU4 +0.27% gave up 50 cents to $836.65 an ounce. High-grade copper for July delivery HGN4 -0.26% fell 1 cent to $3.09 a pound. Concerns that a Chinese probe into the use of metals for obtaining loans will hurt demand pushed copper to its biggest drop in seven weeks on Wednesday.
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