As gold prices and equities undergo the usual summer doldrums, Scotia Capital analysts predict “a seasonally stronger period for gold equities” and higher gold price volatility ahead.
Author: Dorothy Kosich
Posted: Friday , 06 Jul 2012
RENO – In its recently published Gold Quarterly Review, Scotia Capital forecasts an average gold price of $1,750/oz for 2012 to 2014, $1,500/oz in 2015, $1,400/oz in 2016, and $1,200/oz for 2017 and beyond.
“We expect high levels of volatility in the gold price to continue into the foreseeable future and expect the gold price to perform better following the summer vacation season (seasonally a weak price for gold),” wrote Scotia Capital gold and precious metals analysts Tanya Jakusconek, Joanne van Ballegooie, and James Bender.
Noting that, historically, the gold price and gold equities generally experience a pullback in June and July, the analysts said, “Looking forward we will be entering a seasonally stronger period for gold equities following the traditional summer holiday period. We expect high levels of volatility in the gold price to continue and expect a stronger performance in the latter part of the year.”
Meanwhile, the analysts expect gold investment demand to increase from 62 tonnes last year to 281 tonnes in 2012.
Scotiabank Global Banking and Markets (GBM) is forecasting gold mine production will increase about 3% this year, with total cash costs for North American producers of about $616/oz this year, and about $680/oz. when including international producers.
About 15 tonnes of net producer hedging is also anticipated this year. “We do not believe that senior gold producers will change their hedging strategies in 2012; instead, hedging will likely come from non-gold producers trying to secure financing for base metals projects (from gold streams) or smaller producers who require bank financing to build their projects,” said Scotiabank GBM. “The outstanding global hedge book remains modest at ~160 tonnes.”