Morgan Stanley has forecast a continues further fall in the price of gold into 2014 as the Federal Reserve begins the process of tapering its bond buying programme. Morgan Stanley analyst, Joel Crane, speaking in a video report said:
We recommend staying away from gold at this point in the cycle.
Our forecast profile heading into next year is relatively flat against our expectations of rising real interest rates and the U.S. dollar.
In its quarterly metals report published on October 7, the corporation expected bullion to average $1,313 a ounce in 2014 down from the 2013 average of $1,423. Bullion is set to face its sixth weekly loss in seven, despite the US government shutdown. Indeed bullion may be heading for its first annual loss in 13 years falling by 22 per cent in 2013.
Following the announcement in June that the Fed was going to taper its bond buying programme, the price of gold dropped to a 34-month low of $1,850.50. Morgan Stanley's bearish outlook on gold follows a string of similar forecasts by Goldman Sachs and Credit Suisse. Jeffrey Currie, head of commodities at Goldman described gold as a "slam dunk" sell. Goldman has estimated that gold may fall to as low as $1050 an ounce by 2014 while Credit Suisse $1,180.
Despite announcement that the Fed would delay tapering, Morgan Stanley remains confident about the Fed's intentions to begin the process.
Morgan Stanley analysts wrote on 7 October:
Tapering has been postponed not canceled, and is expected by year end.
We also expect the political stalemate in Washington to be broken before the debt ceiling is breached. Consequently, we see little immediate upside to the gold price either in the immediate future or next year.
711.8 metric tons of have been sold been from bullion-backed exchange-traded funds this so far this year.