After a relatively uneventful few months for the gold market, prices broke out of their six-month range in dramatic fashion last week. Gold’s fall below the crucial USD1,130/oz level has seen the metal trade to a fresh five-year low of USD1,078/oz in recent days. While the market has since gained some composure, we expect further downside to ensue given the significant shift in market positioning.

Market positioning is reflecting a renewed negativity towards gold. While our short-term forecast of USD1,100/oz was met recently, we were surprised at the manner in which it occurred, having previously expected a gradual grind lower. 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. We have revised our gold, silver and PGM forecasts lower, particularly in the short term. A clear difference between the current price weakness now, and the 2013/14 episode is that China and India are unlikely to surprise the market with strong physical gold demand. Despite prices that are sharply lower than a few months ago, local market premiums have remained largely unmoved. This suggests the gold markets in both China and India, the world’s largest gold consumers, are well supplied.


We have made downward revisions to our gold forecasts for the next 18 months. Near term, we expect gold to test USD1,020/oz by December. A strengthening USD, a

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