Societe Generale cuts gold, raises Brent crude price forecasts for 2013

Societe Generale on Wednesday cut its 2013 price forecasts for gold and silver among precious metals, and aluminium and copper among base metals in its latest Commodities Review note. The bank also raised its 2013 Brent crude price forecast while lowering its US WTI price forecast for the year.

GOLD

The bank lowered its gold outlook for 2013 to $1,500 per ounce and for 2014 to $1,400 per oz. According to the Reuters Precious Metals Poll published on January 22, the bank had forecast the 2013 gold price at $1,700 per oz and 2014 at $1,600 per oz.

It said it did not believe there is enough latent interest in gold for the price to overcome the resistance that is now provided by the trendline from the bull market that started in late 2008 and which was broken in January.

"On the contrary, we believe that this upward leg will be gold's 'last hurrah' as an upward correction before a gentle bear market develops," it said in the note.

SILVER

Societe Generale cut its 2013 silver price outlook to $27 per oz and 2014 to $26 per oz. According to the Reuters Precious Metals Poll, the bank had seen 2013 silver at $31 and 2014 at $29.

The bank noted that silver is essentially an industrially driven metal with precious characteristics, that tends to rely on gold for any strong upward runs.

"This potential (for upward runs) is receding. We are expecting gold rallies during the year on the ebb and flow of risk appetite, and silver, trading at just below $30 as we write, could easily rally towards $35 in an upward gold move," it said.

"An improving economic outlook, and a rising demand base, should help to support the price on any dips towards $25."

OIL & NATURAL GAS

The bank raised its 2013 Brent crude price outlook, saying oil's fundamental outlook remains balanced and constructive to bullish.

The bank raised its Brent price forecast for 2013 to $112 a barrel from $110.

"Our level of confidence in healthy China-led demand growth and aggressive Saudi production cuts to offset U.S. supply growth has increased, based on data in recent months," SocGen said in a note.

The bank lowered its forecast for U.S. WTI crude for 2013 to $96 from $97 a barrel, noting that it had increased its expectation of the growth rate for U.S. and Canadian supply while also slowing down the rate of increase of new pipeline infrastructure coming online this year.

SocGen raised its forecast for 2013 average natural gas prices to $3.70 per million metric British thermal units from $3.52 mmBtu citing tighter supply-demand balances for spring than expected last quarter. Nevertheless, downward price pressure is still expected on the summer part of the curve, it said.

BASE METALS

The bank saw aluminium's 2013 average price at $2,160 per tonne, slightly below its last forecast of $2,185 per tonne.

"A cyclical recovery in China, ongoing expansion in the U.S. and stabilisation in Europe should be reflected in a modest (aluminium) price upswing during the course of 2013," it said.

It saw copper averaging $7,900 per tonne in 2013, $75 lower than its last forecast.

"For 2013 we expect the copper market to move into a surplus to the tune of 300,000 tonnes followed by a bigger surplus of 620,000 tonnes next year as supply growth accelerates further," it said.

Below is a table of SocGen's quarter-wise commodity price forecasts for 2013:

PRECIOUS METALS

Q1'13 Change Q2 Change Q3 Change Q4 Change

Gold $/oz 1,625 -75 1,550 -200 1,450 -250 1,375 -275

Silver $/oz 30.0 -1.0 28.0 -4.0 26.0 -5.0 24.0 -5.0

CRUDE OIL

Nymex WTI $/b 93.7 -1.0 91.5 1.8 98.7 -1.8 99.8 -2.5

ICE Brent $/b 113.1 3.5 109.0 4.3 113.7 0.7 112.3 0.0

NATURAL GAS

Nymex NatGas $/MMBtu 3.49 -0.11 3.50 0.34 3.38 -0.12 4.39 0.59

BASE METALS (LME)

LME Aluminium $/t 2,050 -100 2,225 0 2,125 0 2,240 0

LME Copper $/t 8,000 -200 8,300 -100 7,800 0 7,500 0