Gold price may hit USD 2,075 per ounce average for 2012

In an interview with CNBC-TV18, Tom Price, Global Commodity Analyst, UBS Equities Research finds that the European debt crisis has left a significant mark on the commodities market. In terms of demand growth, Europe is actually not a big driver in the commodities market but it does affect sentiment, says Price.

“If there is uncertainty in the availability of debt within Europe, that has a knock-on impact on the rest of the world.”

As a house, UBS is bullish on gold. “We have a forecast of USD 2,075 per ounce average for 2012,” he confirms adding, that if their outlook on gold worries an investor, aluminum and thermal coal are other commodities one can look at.

Below is a verbatim transcript of his interview with CNBC-TV18’s Udayan Mukherjee and Mitali Mukherjee. For complete details watch the accompanying video.

Q: How are commodity markets dealing with this intense volatility in the currency market over the last few days?

A: All commodity prices right now are exhibiting very high levels of volatility, gold in particular. There is a lot of uncertainty out there so gold has enormous appeal. We are all waiting for some sort of major macro event. Is it going to come out of Europe, are they going to bring the debt dramas in Greece under control, will it spread to Spain and Italy – these are the sorts of issues that the market is sort of grappling with and that feeds directly through to the confidence in the commodity markets and there is not a great deal of it at the moment.

Q: This currency volatility is being read as the fact that there could be some kind of liquidity crisis brewing especially in Europe and that more and more people are now beginning to price in a recession. Is that something that you see commodity prices or markets pricing in?

A: It is interesting how the European debt crisis actually affect commodities. In terms of demand growth, Europe is actually not a big driver in the commodities market but it does affect sentiment. If there is uncertainty in the availability of debt within Europe, that has a knock-on impact on the rest of the world.

So it is an indirect impact but a significant one. Its substantial and that is how it influences commodity markets. It is interesting seeing the Premier of China make some inspiring comments about Europe’s outlook because it is really China that is the primary driver of most commodity markets with some support from the US and very little support from Europe.

Q: Are you surprised with the kind of inherent and relative strength crude has been displaying?

A: It has been sold-off quite a bit over the last few weeks and months. The WTI in the US has reflected very high inventory levels there and also weak demand. Brent crude is trading USD 10 per barrel to a premium to that which probably reflects the fundamentals who trade globally better than WTI, where they are both been sold-off quite a bit. So I think the downside is fairly limited from here.

Q: What about gold?

A: At UBS we are so frustrated with the volatility; we are offering a range of gold prices. We are talking to our clients about the gold price staying within a range of USD 1,800 to USD 2,000 per ounce for the rest of this year. We actually have a forecast of USD 2,075 per ounce average for 2012. As a house we are formally bullish on gold.

The basis of that is we are expecting uncertainty, mainly in Europe and to some extent the US to feed into the gold price and creating anxiety in trade. It is going to be the way your value is going to be held up across the commodity world. Gold is not the only place you can go to if you are worried about the outlook. Aluminum and thermal coal have limited downside and they are also commodities you might want to think about. – Source: http://www.moneycontrol.com

Posted by VBN on Sep 20 2011. Filed under Gold. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry