Gold bulls are probably ready for 2013 to draw to a close. With gold’s bull market, barring a miracle, coming to an end with the SPDR Gold Shares (NYSEArca: GLD) and the iShares Gold Trust (NYSEArca: IAU) down 22.2% year-to-date, a turning of the calendar could be just what the doctor ordered for bullion.
GLD and IAU have not only substantial losses in terms of returns, those ETFs along with rival gold funds have hemorrhaged assets. GLD and IAU are both on the list of 10 worst ETFs in terms of 2013 outflows. Point is this has been a rough year for gold. Next year may not be much better. [Debt Ceiling Weighs on Gold ETFs]
Morgan Stanley said gold will average $1,313 an ounce next year, well below its 2013 forecast of $1,420 an ounce, the bank recently said. At that price point, it is not just physically-backed ETFs like GLD and IAU that could be pinched. The longer gold labors around $1,300 an ounce, the more vulnerable it is to further declines. Deeper price retrenchment could mean profitability issues for the stocks found in ETFs like the Market Vectors Gold Miners ETF (NYSEArca: GDX). [Mining ETFs Vulnerable as Gold Prices Fall]
Gold is a “’slam dunk’ sell for next year because the U.S. will extend the recovery after lawmakers resolve the stalemate, said Jeffrey Currie of Goldman Sachs, reports Glenys Sim for Bloomberg. Currie’s comments pertain to the government shutdown, the first in the U.S. since the 1990s.
Investors sold 711.8 metric tons from bullion-backed exchange-traded products this year, erasing more than $61 billion from the value of the funds, according to Bloomberg.
Goldman and Morgan Stanley are not the only banks that see lower prices ahead for bullion. Last month, Bank of America Merrill Lynch slashed its 2014 forecast on gold by 17.2% to $1,294 an ounce. Prior to that, Citigroup said it sees gold averaging $1,250 an ounce next year.