The gold price fell to a five year low last week of less than $US1080 an ounce, and while it has slightly recovered to above $1090/oz, ANZ noted there had been a significant negative shift in market positioning.
“While our short-term forecast of $1100/oz was met recently, we were surprised at the manner in which it occurred, having previously expected a gradual grind lower,” ANZ said.
“Nevertheless, continued liquidation of gold from exchange-traded funds and the extent of investor positioning in Comex gold does suggest that prices will stay on the back foot for some time.”
ANZ believes gold could test $1020/oz by December due to a stronger US dollar and weak physical demand.
Analysts now expect the gold price to average $1060/oz this quarter, down 3.6% on the previous estimate of $1100/oz, and $1020/oz in the December quarter, down from $1125/oz.
The forecast for the March 2016 quarter was reduced by 8.5% to $1075/oz and the June estimate was lowered by 10% to $1125/oz.
“The market is positioned very short and on some measures, looks even more bearish than in 2013,” ANZ said.
“Physically backed exchange-traded gold are again liquidating gold holdings, with the correlation between the gold price and ETF holdings at an eight-month high.
“We do not think that such a significant change will reverse quickly, with the breadth and length of the decline in gold prices now likely to be longer.”
ANZ said the main difference between 2013’s gold price weakness and now is that China and India are unlikely to surprise the market with strong physical demand.
“Despite prices that are sharply lower than a few months ago, local market premiums have remained largely unmoved,” it said.
“This suggests the gold markets in both China and India, the world’s largest gold consumers, are well supplied.”
ANZ also slightly downgraded its silver forecasts and expects it to average $14.50/oz this quarter and $14/oz in the December quarter, before rising back to $16/oz in the June 2016 quarter.
Palladium copped the biggest downgrades, with the outlook this quarter and next lowered by 10.1% and 13.9% to $690/oz and $720/oz respectively.
Platinum is expected to trade at below $1000/oz for the next three quarters.
