Gold loses its shine with stimulus cut

Major banks such as Morgan Stanley, Goldman Sachs and UBS cut their gold forecasts because expectations grew that the US Federal Reserve may scale back monetary stimulus. A potential Fed taper, together with a stronger US dollar and rising US bond yields, has reduced investor demand for safe‑haven assets like gold.

Morgan Stanley cut its gold targets across several years: it lowered the 2013 target to US$1,409 (about $1,527), trimmed the 2014 prediction to US$1,313 (from US$1,563), and reduced the 2015 estimate to US$1,300 (from US$1,450).

Bullion fell about 23% in 2013. That drop is notable — analysts say gold is heading for its biggest annual decline in more than three decades and recently slumped to its lowest level since September 2010.

Fed chairman Ben Bernanke signalled the central bank might slow its bond‑buying program if the US economy continued to improve. That prospect of reduced stimulus weakened demand for safe‑haven assets and contributed to a sell‑off in gold.

According to analysts, three key forces are weighing on precious metals: waning investor demand for safe havens, a strengthening US dollar, and rising US bond yields — all of which typically pressure gold and silver prices.

The article reports the spot price of gold in Sydney finished at US$1,282 an ounce, a slight rise from Monday’s close of US$1,280.

Everyday investors should watch Fed policy comments and decisions on bond‑buying (tapering), signs of US economic improvement, moves in the US dollar and US bond yields, and updated analyst forecasts — all of which have driven recent gold price changes.

Yes — the article notes that analysts are cutting their outlooks for gold. Major institutions including Morgan Stanley, Goldman Sachs and UBS have lowered forecasts amid the recent sell‑off and changing macroeconomic expectations.