"QE 3.5 is likely, possibly as soon as December, in the form of ongoing purchases of Treasuries"
Investment bank Credit Suisse Group AG (CS) raised its
gold and
silver forecasts for both 2013 and 2014 Friday, upping
gold's 2013 price forecast 7%, to $1,840 a troy ounce from $1,720/oz, and
silver's 13% to $33.10/oz from $29.20/oz.
For 2014, the bank raised its
gold forecast 17%, to $1,750/oz from $1,500/oz, and
silver's by some 24%, to $31.40/oz from $25.40/oz.
The bank cited three main factors driving the forecast changes. First, it expects that more quantitative easing from the U.S. Federal Reserve is more likely than not. This benefits
gold in its capacity as a hedge against currency weakness and inflation, with
silver prices tending to track gold price moves.
"The Fed is not finished: QE 3.5 is likely, possibly as soon as December, in the form of ongoing purchases of Treasuries after Operation Twist expires. The Federal Reserve appears prepared to accept the political risks of further balance sheet expansion [and] on that basis, it seems probable that real yields can fall further into negative territory, which should be positive for
gold," say the bank's analysts, noting that "a move back in to the $1,830/oz area would simply place [
gold] back on the long term trend."
Furthermore, the bank says early next year, the
gold market will be highly tuned to any suggestion that one or more of the major ratings agencies might cut the U.S. credit rating if Congress fails to adequately address the various fiscal issues. Although Credit Suisse economists believe deals will be done to avoid the worst effects of the expiry of tax rebates and automatic sequestration of spending, "those deals may well be temporary and deep structural issues will remain unresolved," the bank said.
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