C S Precious Metals 15 July 2013

Commodity Spotlight Precious Metals

Headwind for gold should ease in the autumn

The gold price has suffered its largest quarterly loss for more than 40 years triggered by record ETF outflows, a forthcoming reversal of US monetary policy and rising US real interest rates. The price should increase again as soon as the scaling back of Fed bond purchases is factored in and most of the ETF in vestors willing to sell have withdrawn. We expect this to happen in the autumn. Silver, which has lost even more of its lustre than gold, should also recover. Platinum and palladium have remained largely unscathed by the weakness affecting gold. Supply risks and robust demand are also continuing to support prices.
In the second quarter, the gold price registered its largest quarterly percentage decline since the system of fixed exchange rates ended and the as sociated floating of the gold price started in the early 1970s. After the historic steep decline of mid-April and a 2-month stabilisation phase, the yellow precious metal came under renewed pressure in the second half of June, sinking to a 3-year low of USD 1,180 per troy ounce by the end of the month. What are the reasons for the ongoing price weakness and what are the future prospects?
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