Thursday, April 7, 2011

Standard Chartered Calls For $2,100 Gold In 2014

Accroding to the Financial Times' write-up of its forecast, Standard Chartered is beginning to work in numbers that formerly were confined to hard-core goldbugs. Basing its forecast on the gold super-cycle, its gold team said that gold could peak at more than $2,100 in three year's time. They also included an outside-chance call of more than $4,800 by 2020. The reason given was not an impending inflation crisis, but a more sedate justification: rising world demand, particularly in Asia.
"We find that there is a powerful relationship between income per head in Asian emerging markets and the gold price, which suggests further significant upside for gold," it said in the report. "Also, our FX team is forecasting further (dollar) weakness against the Chinese yuan and Indian rupee."...

Our base-case forecast is that prices rally to peak at an average $2,107 an ounce in 2014, although our statistical modelling also suggests a possible 'super-bull' scenario of gold prices rallying up to $4,869 an ounce in nominal terms by 2020."
With regard to real interest rates, Standard Chartered doesn't think that rates will be hiked enough to make for high real rates until several years from now. What they're worried about is higher gold prices calling forth supply increases.

The number is impressive, but a run from today's $1,460 to $2,107 in 2014 imples an annual growth rate of about 11% if the average is hit in the middle of the year. That's less than gold's annual percentage gain over the last ten years. $4,869 in ten years' time implies an annual growth rate of 12.8% in those ten years, which is close to gold's annual gain over the past ten.

So, this forecast isn't that off-the-wall. Essentially, it says that gold will continue doing what it's been doing for the next three years and possibly seven more.

No comments:

Post a Comment