Less ETF Liquidation Might Not Help Gold Prices – Macquarie

(Kitco News) - Investment outflows from gold-backed exchange-traded funds should be significantly lower in 2014 compared to last year, but that won’t necessarily translate into higher gold prices, said analysts at Macquarie Wednesday.

It its forecast for the year, the bank said that it expects gold prices to average about $1,215 an ounce in 2014. The analysts also could not rule out the price dropping to $1,100 an ounce in the first half of the year. They add “it would be short-lived and gold could rally in (the second half of) 2014 as Indian demand recovers.”

The analysts said fading geopolitical risks, low inflation expectations and the Federal Reserve’s plan to cut back its quantitative easing measures were all significant factors in gold’s selloff in 2013. They added that those themes will continue to dominate the marketplace.

“However in all three cases it could be argued that this is also the market consensus and therefore should not come as a shock, and we expect the Fed to try to keep long-term rates contained through ‘forward guidance,’” the analysts said.

Looking at ETF markets, the analysts pointed out that about 900 metric tons of gold was sold in 2013. Looking to 2014, they are expecting another 500 tons of the yellow metal will be liquidated, which is about 30% of the current global holdings of 1,800 tons.