Big name banks cut forecasts for gold

9:55 am by Fiona MacDonald

Morgan Stanley’s downgraded forecasts came the same day Credit Suisse (NYSE:CS) also made cuts to its projections for the precious metals, with the bank saying that expectations of Chinese growth were “too optimistic.”

High profile downgrades for gold and silver came from every corner Tuesday, as the yellow metal’s recent plummet was translated into lowered forecasts from some of investment banking’s biggest names. It is the newest indignity for the commodity, which recently ended a 12 year bull run by dropping approximately 24 per cent so far this year.

Copper, the base metal so often mined alongside gold and silver, was also touched by the cuts spreading from bank to bank.

Morgan Stanley (NYSE:MS) lowered its guidance for gold Tuesday as fear of scaled back monetary stimulus spread. The bank’s 2013 target for the metal was cut from $1,487 per ounce to $1,409, a drop of 5 per cent while figures for 2013 were cut from $1,563 to $1,313, a 16 per cent cut.

Silver was also a victim of a lowered guidance, with the metal being cut to $23.39 per ounce for 2013, a 14 per cent reduction. Silver’s forecast for next calendar year was cut to $21.01 per ounce, down 29 per cent. The bank also lowered its forecasts for the two precious metals through until 2018.

Morgan Stanley’s downgraded forecasts came the same day Credit Suisse (NYSE:CS) also made cuts to its projections for the precious metals, with the bank saying that expectations of Chinese growth were “too optimistic.”

Gold was the victim of both slowing inflation and whispers of QE tapering that took the average gold price for 2013 to $1,400 an ounce from a previous level of $1,580. Similarly, the investment bank cut its predictions for silver from $28.50 per ounce to $24.20 per ounce.

Meanwhile, the bank lowered the prediction for copper from $7,482 a metric ton to the new level of $7,240.

Slowing near-term demand growth in China also prompted Goldman Sachs (NYSE:GS) to cut its copper forecast Tuesday.

Analysts at the bank cut the three month estimate to $7,000 a ton, down from $7,500, also lowering the six-month projection from $8,000 to $6,600 and the forecast for the next 12 months to $6,600 from $7,000. With a great deal of copper used in construction, it is a change borne of a weakening in the nation’s level of construction completions, China’s biggest end-user market for the red metal.

The news comes the day after the investment bank cut its forecast for gold, saying it expected gold to end the year at $1,300 a troy ounce, a dip of almost 10 per cent on its prior forecast. The outlook for 2014 was also cut, with the bank’s expectation that the metal would end that year at $1,050 representing a drop of more than 17 per cent on previous figures.

Gold was trading up on the Comex Tuesday morning, with gold futures for August delivery – the most active market – rising from a previous settle of $1,277.10 to hit $1,279.80, an increase of $2.70 as at 9:39am EST.

Silver also rose on the Comex, with the market for July delivery moving from a settle of $19.49 per ounce to $19.64 per ounce in morning trading.

Copper was also up, with July, the most active market, trading at $3.07 from a prior settle of $3.02.

Commodities Wrap
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