Macquarie predicts gold price will trough in Q3

The recent price fall in the yellow metal has been extreme, but with the Fed on course to raise rates and physical markets lacklustre it might not be over yet.

Nevertheless, “we stick to our view that some confidence should return to the market post a Fed-hike, though gains are likely to be slower and more moderate than we had previously predicted,” analysts at Macquarie said in a research note e-mailed to clients.

In the same note, issued on Friday morning, they lowered their gold price forecasts for 2015 and 2016 to $1,152 and $1,163 per ounce, respectively, from $1,249 and $1,363 beforehand.

The broker also trimmed its forecasts for silver this year and next to $16 and $17 per ounce from $17 and $20 previously.

“It’s undeniable that in the last few weeks some of the remaining best hopes for gold bulls have evaporated,” Macquarie went on to say.

"Gold was the ultimate symbol of the systemic threats to the US financial system"

The fact that flows into and out of gold exchange traded funds increasingly follow instead of leading movements in gold prices meant outflows might accelerate in the days after the research report was published.

Likewise, the market was still only marginally short gold, although sentiment among investors in gold futures was very bearish.

Indeed, “in a longer-running data series, which uses similar definitions, shows the market has been far shorter on this basis before 2002, implying there is room for the short position to get much shorter still,” the broker’s commodity team led by Matthew Turner added.

Among some of the other factors weighing on gold was the fact that the metal was “the ultimate symbol of the systemic threats that hit the US financial system in 2008/2009 crisis” but had now finally gone.

“Gold’s dual nature as a currency and a commodity, which served it so well during the bull market years when both alternatives to the dollar and commodities were popular, is now hurting it on both counts as investors and consumers shun it alike.”

Despite all of the above, Turner’s team predicted the price of gold would trough in the third quarter of this year, at an average price of $1,125 per ounce before heading higher to $1,125 in the last three months of the year.