The Week In Hindsight, 14 December 2013

Gold remained volatile throughout the week as both traders and investors continued in their attempts to second guess the Federal Reserve.

Spot prices have remained relatively resilient following last week’s payrolls numbers, recovering swiftly from lows near to $1200 per ounce before plunging again as bullishness surrounding the US retail sales numbers this Thursday grew.

Societe Genarali issued their own forecast late last week to accompany those of other institutions, the bank sees gold prices falling to $1175 per ounce in the near future although the timing of that drop it has not specified. Goldman Sachs continues to reiterate its own price target of $1080 per ounce by Q3 2014.

Our view remains unchanged; price volatility is likely to continue until the road ahead where US monetary policy is concerned becomes clearer. Should the FOMC opt to hold off on slowing down the pace of its asset purchase program gold could then see further upside ahead of the New Year. However, we would expect any gains to remain capped at $1300 per ounce while any decision to commence tapering would provide a green light for a break below $1200 per ounce.

The medium to longer term outlook for the metal remains bearish with prices likely to move some distance lower before they are able to begin any recovery back toward the present levels.