bloomberg.com / By Phoebe Sedgman / Jan 25, 2013 12:11 AM GMT+0800
Gold will rally this year and into 2014 as U.S. Federal Reserve policy makers will probably maintain asset purchases for two more years to buttress the recovery of the largest economy, according to Morgan Stanley.
The metal, which rose for a 12th year in 2012, may average $1,830 an ounce in the final quarter from $1,715 in the first, $1,745 in the second and $1,800 in the third, analysts Peter Richardson and Joel Crane said in a report today. Prices will be supported by investment and central-bank buying, they wrote.
Gold had the biggest quarterly drop since 2008 in the final three months of last year as data showed the U.S. recovery gaining traction, boosting concern that the Fed may withdraw stimulus. Minutes from the Federal Open Market Committee’s December meeting released on Jan. 3 showed members debated an end to asset purchases this year. Each month the Fed has targeted buying $85 billion of Treasuries and mortgage debt.
“We are skeptical that dissenters within the FOMC on current monetary policy will succeed in overturning the current policy settings before the end of 2014,” the analysts wrote, citing elevated unemployment and so-called tail risks to growth. There would be an “ongoing commitment to QE3,” they said, using initials for the third round of quantitative easing.
Gold for immediate delivery fell 0.7 percent at $1,674.48 an ounce at 4:09 p.m. in London. The price dropped to $1,625.85 on Jan. 4, the lowest level since August, after the release of the FOMC minutes. Gold, which slumped 5.5 percent in the three months to December, is little changed this year.