Gold is in a “bubble” after the best annual run in at least nine decades and will head into a so-called bear market as a stronger U.S. economy helps increase interest rates and cut bullion demand, Societe Generale SA (OTCMKTS:SCGLY) (EPA:GLE) said.


On 2 April, Societe Generale SA (OTCMKTS:SCGLY) (EPA:GLE) released special report “The end of the gold era” in which they forecast that  gold would  fall  to  $1375/oz  by  the  end  of  2013.  The  price  at  the  time  of  publication  was $1600/oz. Within two weeks of publication prices reached $1360/oz. So prices fell below their target, but simply faster than they had expected.

Reiterating bearish call on the Gold, the firm predicts today that the yellow metal will fall to $1,200/oz by the fourth quarter of this year.

gold price

Societe Generale’s view on Gold

SocGen  believes  that  the  dramatic  gold  sell-off  in  April,  combined  with  the  prospect  of  the  Fed starting to taper its QE programme before year-end, has resulted in a paradigm shift in many investors’ attitude towards gold.

 This is likely to result in continued large-scale gold ETF selling this year and next. ETF gold has averaged about 100 tonnes per month since the April sell-off. We expect continued ETF selling to exceed higher demand for jewellery/bars and coins. Therefore, they have revised lower our Q4 13 gold forecast to $1,200/oz.

SocGen doesn’t think that the reported very high gold production costs will prevent the gold price from trading  down  to  $1,200/oz.  And  while  production  cost  concerns  may  slow  the  price  decline below $1,200/oz, this factor is unlikely to provide firm support until we get closer to $1,000/oz.

SG primary gold forecast

Societe Generale SA (OTCMKTS:SCGLY) (EPA:GLE) concluded report with the belief that the dramatic price drop in mid-April was the beginning of the deflation of a bubble. The gold price rally in the late 1970s turned out to be a bubble. They think this time is not  much  different &  reiterate  their  sell  recommendation  on  it  and  lower   Q4  2013 forecast to $1,200/oz