Gold to Peak Above $2,200 in 2013, But No “Sharp Decline Thereafter”

BNP Paribas was the latest investment bank to raise its gold forecasts amid the yellow metal’s recent surge to new all-time highs.

In a note to clients on Wednesday, the firm wrote that “In light of the latest economic and financial developments, the assumptions underpinning our previous price forecast have changed. As a result, our 2011 average gold price has been raised by US$125/oz relative to our previous bullish forecast to US$1,635/oz.  We now expect the gold price to average US$2,080/oz in 2012, from US$1,600/oz previously, and US$2,200/oz in 2013.”

BNP went on to say that “We maintain our view that gold will peak with the beginning of monetary tightening in the US. In our current forecast, this occurs in 2013, but a move in rates could take place earlier should economic conditions improve more quickly than currently expected.”

“We do not expect a sharp decline thereafter.  A number of factors should continue to be supportive for gold beyond 2013, including the debt level of developed economies and increased uncertainty within the international monetary system.”

“In the short term, a correction in the gold price is likely given the extent of the rally in prices since the beginning of August. A downward move would likely be triggered by a resumption of the market’s risk-on mode for several days running.”