Gold Rebound to $1,600 Seen by Fund Manager Day on Bank Stimulus

Gold will rebound to $1,600 an ounce by the end of this year as governments maintain efforts to boost economic growth for the next few years, according to the president of Adrian Day Asset Management. Investors have been overreacting to speculation that the Fed will begin trimming its monthly bond purchases.

By Alex Pashley and Nicholas Larkin
August 14, 2013
BusinessWeek

Gold will rebound to $1,600 an ounce by the end of this year as governments maintain efforts to boost economic growth for the next few years, according to Adrian Day, president of Adrian Day Asset Management.

Investors have “grossly overreacted” to speculation that the Federal Reserve will begin trimming its monthly bond purchases, Day said an in an interview yesterday. Bullion is down 21 percent this year as Fed policy makers debated the pace of asset purchases.

“All the Federal Reserve is talking about is cutting back on the additional stimulus put in place,” Day said. “No one is talking of tightening or reducing the Fed’s balance sheet.”

Adrian Day Asset Management, based in Annapolis, has about $135 million under management and last month teamed with Peter Schiff, chief executive officer of Euro Pacific Capital Inc., a brokerage based in Westport, Connecticut, to start the EuroPac Gold Fund to invest in precious metals and mining and exploration companies. The fund has raised $9.5 million, Day said. He wouldn’t disclose which investments were made.

Gold for immediate delivery rose 0.4 percent to $1,326.72 an ounce at 10:07 a.m. in London. The Standard & Poor’s GSCI gauge of 24 commodities lost 1 percent since the start of January and the MSCI All-Country World Index of equities gained 11 percent. Treasuries declined 3.1 percent, the Bloomberg U.S. Treasury Bond Index shows.

Goldman Sachs

Central-bank buying won’t be enough to prevent further declines, Goldman Sachs Group Inc. said in a July 24 report. Prices will probably fall to $1,050 by the end of next year. ABN Amro Group NV forecast average prices of $1,000 next year and $840 in 2015. Net short positions, or bets on falling futures prices in New York, gained ninefold since November, U.S. Commodity Futures Trading Commission data show. The bearish wagers reached a record July 9, the data show.

Bullion rose 70 percent from December 2008 to June 2011 as the Fed bought more than $2 trillion of debt. Fed chairman Ben S. Bernanke next month will probably reduce the central bank’s monthly bond purchases, according to 65 percent of economists surveyed by Bloomberg.

Prices of gold climbed 7.3 percent in July, the first monthly advance since March, on signs of increased physical purchases. Bernanke said last month it’s too early to decide whether to begin scaling back debt purchases in September, after saying on June 19 that bond buying could slow if the economy improves.

“At some point we’ll break through the $1,400 level and then the shorts will panic to cover, and gold will accelerate,” Day said. “We could easily be at $1,600 by the end of the year. Certainly by 2015 we’ll be seeing $2,000.”

To contact the reporters on this story: Alex Pashley in London at apashley@bloomberg.net; Nicholas Larkin in London at nlarkin1@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net

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