ABN AMRO Downgrades Gold Outlook As Prices Remain Below 200-DMA

By Kitco News
Wednesday October 12, 2016 12:42

(Kitco News) - The bears are back in the woods as more bank analysts downgrade their gold forecasts following last week’s more than 5% drop, its biggest percentage decline in almost three years.

The latest bank to join the chorus of bear calls is ABN AMRO, with analysts at the bank saying that the 2016 bull market is over as gold has dropped below its 200-day moving average, which comes in at $1,260 an ounce. December Comex gold futures last traded at $1,254.30 an ounce, relatively flat on the day.

In a report published Wednesday, Georgette Boele, coordinator of FX and precious metals strategy at the bank, said that they expect gold prices to end 2016 at $1,200 an ounce, down from the previous forecast of $1,325. The Dutch bank expects prices to end next year at $1,150 an ounce, down from the previous forecast of $1,450.

Boele said that she is watching gold’s speculative interest to determine where prices are going in the near term. She warned that gold’s net length is still at elevated levels, despite last week’s liquidation, which caused the price drop.The latest data from the Commodity Futures Trading Commission shows gold's net length at 200,116 contracts, down about 26%percenage points from its all time high seen in early July.

“The drop in gold prices since 27 September 2016 was the result of a relatively small position liquidation. If the positions in the futures market would be liquidated to the long-term average of around 100,000 contracts, prices will likely be back at the level we started this year,” she said in the report. “We think that it is unlikely that investors will add to their positions in short-term, which means that they will sell on rallies.”