Worst Case, Gold Could Reach $850

November 13, 2013 at 08:39


As gold dips below $1,300 an ounce, the price of bullion looks set to keep falling. Bernard Dahdah, Precious Metals analyst at Natixis, believes prices will continue to drop to $1,200 by Q2 next year but could even drop down to $850, adding that we also need to look at China, Japan and India to see how their exchange reserves and imports will affect things.


JOURNALIST ASKING BERNARD HETTICH: ‘Now, Bernard, even the gold producers are concerned about soft prices going forward. And also, we’ve had this reaction to the good jobs numbers. Presuming if the U.S. economy is continuing to improve, how much of this pressure could we see continuing? I mean what kind of levels are we talking about? How low can gold go and by when?’

BERNARD DAHDAH: ‘Yeah, we’ll first of all look at it in terms of our short-term outlook. I think we saw the positive U.S. figures right now and we’re seeing interest, 10-year interest yields in the U.S. going up by 10 bips since mid-October. This increases the opportunity cost of holding gold. The other thing also is weak figures from Europe, we’ve seen a revision in their growth levels. This will increase the strength in the Dollar, which is also not very good news for gold. So as I’ve mentioned to you, short-term we see gold at $1,200 and in our longer term perspective, we see it at $1,250. But for your question about how low can gold go, we have done a study that we published around two months ago saying that if we could go down, slide down the supply curve, we could potentially see gold reach levels of $850 to $1,000. But this is our very low-case scenario.’

JOURNALIST: ‘Right. And when you mentioned short-term and long-term there, what do you mean by short-term, six months, a year?’

BERNARD DAHDAH: ‘I would say – yeah – so first, short-term would be our six-month view or quarter or second quarter of next year and our long-term view is more of a year-end going forward.’

JOURNALIST: ‘And in terms of upward catalysts, I know it’s far and few. Even Randgold that we spoke to last week was saying they were working on the premise of a long-term view that gold prices will be about $1,000. Are there any upward catalysts, I mean what levels are we looking at before the bargain hunters jump in?’

BERNARD DAHDAH: ‘I mean the biggest and our upside scenario in terms for Natixis, I think our biggest concern if you want for higher prices of gold is the debt ceiling issue, how would it be handled. We saw previously that Chinese and Japanese officials were not very happy with the way U.S. politicians have handled the situation. Could we see that those countries with high Dollar-denominated assets in their foreign exchange reserve will move away and into gold? This is a potential catalyst. Also, we have to look at India also, what will happen eventually with their imports of gold, will they loosen maybe a little bit their tightening on the imports of gold? Should they loosen, we could see the levels going back to around 70 tons a month. Currently, Natixis figures show that those levels, those imports are at around six to seven tons and that was September figure and August figure.’