If you have any interest in trading gold futures, you might benefit from knowing about the predictions market experts are making about 2013 prices for the commodity.
Many market experts assert that the underlying basis for gold prices is confidence in the economic and financial markets. The metal has often been described as a "fear hedge," and the commodity has generated substantial visibility over the last 12 years as it has generated unprecedented appreciation.
Price pinnacle
While the metal has surged in price, many financial institutions have started providing predictions for the commodity that are less bullish than previously projected, Barron's reports. More than one of these financial market participants predicted that the market for the metal would reach its pinnacle in 2013.
Credit Suisse predictions
Major financial services firm Credit Suisse recently predicted that gold will average $1,740 per ounce in 2013, according to Bloomberg. While this would be the highest yearly average on record, the firm also estimated that the bull market for this precious metal could most likely crest this year.
"The 12-year-old US dollar gold bull market is not yet dead in our opinion but nor is it in the best of health," Credit Suisse analyst Tom Kendall wrote in a note, Barron's reports. "The gold cycle is likely to peak this year."
Kendall predicted that while gold will rise to an average price of $1,740 per ounce in 2013, which is a 4 percent premium over the year before, it will decline to $1,720 in 2014 and then plunge to $1,500 in 2015.
HSBC estimates
According to the news source, major bank HSBC also reduced its 2013 price estimate for the precious metal. The financial institution lowered its projected annual price for the commodity to $1,760 per ounce. While this figure would represent a 5.1 percent gain during the year, it is below the level of $1,850 projected by the major bank recently. The market experts attributed their reduced estimate to the fact that gold closed at $1,675 per ounce at the end of 2012.
"The gold market is likely to trend higher based in part on more positive underlying supply/demand fundamentals. Emerging Market demand was weak in 2012 but Indian consumption is likely to recover based in historical consumption patterns," they stated, the media outlet reports.
The analysts cited additional factors impacting their price estimate, saying that they predict that China will import significant amounts of the metal, and added that "Scrap supplies while ample, are unlikely to rise at current price levels. Mine supply is likely to grow moderately in 2013 but we do not believe the marginal increase in output will be sufficient to deter a rally."
U.S. budget disputes
The recent debates between lawmakers centering around their federal budget disagreements and their last-minute success in averting the fiscal cliff have helped to fuel economic uncertainty, Bloomberg reports. This weak sentiment is helping to fuel desire for gold as a means of protecting wealth.
Gold could be pushed higher in the coming weeks and months, as these government officials will soon have to deal with the U.S. debt ceiling being reached. Market experts have predicted that approaching this limit will spur newfound discussions about how fiscal policy can be changed to rein in budget deficits. The agreement passed on January 1 to avert the fiscal cliff was also only temporary, and these lawmakers will need to resolve this issue.
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