Gold's summer rally stalled at the start of October 2012 after failing to breach US$1,800/oz for the second time in a month. It has since been see-sawing (Chart 1). Uncertainty concerning the change of leadership in both the US and China may have weighed on investor sentiment at the start of November, as did ongoing uncertainty about the Eurozone sovereign crisis and the fiscal cliff in the US. Perhaps more importantly, it seems that the market is waiting for the Fed to restart balance sheet expansion in earnest. Market sentiment towards gold has been much more uncertain in 2012 than was the case in previous years. Yet, we expect gold to achieve a new record high in 2013 due to further monetary easing, less tail risk related to a breakup of the Eurozone and ongoing support from physical demand. Gold is forecast to average US$1,865/oz in 2013, down from US$1,900/ oz from our previous forecast.
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