Standard Chartered cuts 2014 avg. price forecast for Spot Gold, Silver; raises Spot Palladium, Platinum price

UNITED STATES March 26 2014 6:13 PM

NEW YORK (Scrap Register): Standard Chartered has cut its 2014 average price forecast for spot gold and spot silver while it raised its average price forecast for spot palladium and spot platinum.

Standard Chartered lowered its 2014 average price for spot gold by 8% to $1,225 an ounce, saying the recent gains in the yellow metal are based on U.S. growth concerns and safe-haven buying are overdone.

The bank’s preferred precious metal is platinum, based on strong industrial demand from the auto sector and supply-side risks in South Africa. It also said palladium should find support from another year of supply deficit and solid investor demand.

In addition to lowering its 2014 gold price forecast, the bank cut its 2014 spot silver price forecast by 5% to $19.40. It raised its spot palladium price forecast to $800, a 3% rise, and lifted its spot platinum forecast to $1,575, a 10% hike.

Standard Chartered said physical gold demand should come in when prices dip, but gold will be hampered by the macroeconomic backdrop. For silver, the market is in a continued surplus and a weaker gold market will likely weigh on prices.

Overall it said the rally in commodities in general is based on five main fears, including worries the U.S. economic recovery is faltering and the Federal Reserve may delay its first rate hike, China’s economic growth is expected to significantly disappoint relative to expectations, Chinese investors use of inventory-backed financing will destabilize the commodity markets, heightened geopolitical tensions may affect trade and commodity flows and finally that the supply sides of commodity markets are out of balance, particularly in base metals and energy, said the bank via Kitco News.

The bank said it disagreed with those concerns, saying it doesn’t see the Fed changing course and more likely the Fed may push up the likelihood of the first rate hike. Regarding China, it said the Asian nation’s growth will likely normalize to something more sustainable and believes inventories used as collateral will be reabsorbed into the market gradually. While there is an increase in the importance of geopolitics, it’s too early to project significant constriction in commodity flows, the bank said. Finally, Standard Chartered said the supply imbalances are more cyclical than structural.