ANZ: The gold price has been crushed, and that's the way it will remain

Getty/Jeff J Mitchell

The gold price, as noted by Greg McKenna, can’t take a trick at present. It’s on the nose with investors, and has been treated accordingly.

For some, the decline offers an opportunity to scoop up a bargain. For others, however, the bearish price action is just the start of another leg lower for the once high-flying precious metal.

ANZ, in a note released this afternoon, clearly favours the latter.

Having hit their previous short-term forecast for a decline to $1,100 an ounce, Mark Pervan and Victor Thianpiriya, the bank’s commodity strategists, are predicting further savage falls in the months ahead.

The pair now see the metal falling to $1,020 an ounce by December 2015, a decline of 7.1% from the $1,098 level it currently sits at.

Here they are on the recent decline, and the reasons why they believe the metal will remain under pressure.

“While our short-term forecast of USD1,100/oz was met recently, we were surprised at the manner in which it occurred, having previously expected a gradual grind lower. Nevertheless, continued liquidation of gold from exchange-traded funds and the extent of investor positioning in Comex gold does suggest that prices will stay on the back foot for some time”.

While they admit that speculative investors have sold the metal aggressively recently, they “do not think that such a significant change will reverse quickly, with the breadth and length of the decline in gold prices now likely to be longer”. They also suggest that “a strengthening US dollar, a recent headwind for prices, will continue to pressure” prices, adding “physical demand does not look strong enough to support bullion prices in a meaningful way”.

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