Price of Gold Itself Could Hinder Investment Demand – Commodities Confidential w/ CPM Group

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As investors become increasingly price-sensitive, higher gold prices may actually hurt the yellow metal according to Rohit Savant, Senior Commodities Analyst at CPM Group. In this week’s edition of “Commodities Confidential” we discuss why the price of gold itself may be the deterring factor for investors in the new year, and also review CPM Group’s gold price forecast for 2013, which projects softer gold prices in comparison with last year. Discussing where gold may diverge from historical correlations or patterns, Savant acknowledges that negative real interest rates and currency market volatility would typically result in higher gold prices, but stresses that is not always the case; with both interest rates and currency market volatility, we’ve seen price moves in both directions for gold. CPM Group believes that gold prices will soften regardless of these factors, and are looking at other indicators which they believe are more telling. According to Savant, what will hurt gold in 2013 is the price of the metal itself; investors have been fairly price sensitive he says, and thus are less likely to step in as buyers at high price levels, and are more likely to wait until prices soften. For example, Savant notes that in the first week of 2013 he saw gold prices “come off” but didn’t see a positive response coming in from ETF’s, coin sales, and the like; premiums for coin sales were actually down during the first week of this year, as were net-additions to gold ETF holdings. Based on these factors, Savant says that CPM feels investors are waiting for gold prices to soften before stepping in as buyers. Kitco News, Jan. 11, 2013.

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