Tags: Merrill | 2014 | Forecast | Gold

Merrill's 2014 Forecast: Mostly Sunny Skies, Clouds Over Gold

By    |   Tuesday, 26 November 2013 06:59 PM

Merrill Lynch issued a 2014 investment outlook that sees less volatility ahead and is less cautious than the previous two years. In a separate report issued previously, the firm also cut its outlook for gold, the traditional haven for investors.

To bolster their optimism, 24/7 Wall Street said, Merrill economists point to a litany of favorable trends. They noted the federal budget deficit has declined from 10 percent of GDP to 4 percent.

“Also noted is that banks are recapitalized and are working off their bad loans,” said 24/7 Wall Street, which said it got a copy of the Merrill forecast. “Housing has started to recover, corporations are flush with profits and cash, households have cut their debt servicing costs, and even state and local governments have stopped cutting their budgets.”

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Merrill predicts U.S. GDP growth should accelerate from 2.2 percent currently to 2.6 percent in 2014 and 3.2 percent in 2015.

The firm sees less growth elsewhere around the world, but also sees no major storms on the horizon.

Meanwhile, Merrill predicts U.S. inflation will stay around 1 percent for an extended period, and that the Federal Reserve will not begin tapering its quantitative easing (QE) until March.

The firm’s central bank forecast for next year, according to 24/7 Wall Street: “QE will not end until December. And we expect the first rate hike to come in the first quarter of 2016.”

MarketWatch reported in September that Bank of America Merrill Lynch trimmed its 2014 gold forecast, cutting its outlook by 17.2 percent to $1,294 per ounce.

For this year, Merrill forecast gold will end at $1,419 per ounce, a 4 percent decline from its earlier prediction.

Merrill analyst Daniel Lian said that because investors are looking for a normalization of U.S. monetary policy, “our base case anticipates sustained headwinds in gold prices.”

Lian and other analysts at Merrill predict that because of a rebound in global economic growth, more cyclical precious metals including silver will outperform gold.

MarketWatch summarized the gold outlook for other major banks as well. Citigroup is predicting gold prices below $1,250 before 2013 year-end and that they will average that price in 2014.

Morgan Stanley’s forecast is an average $1,200 to $1,350 per ounce in 2014, and Goldman Sachs said gold could fall below $1,000 per ounce in the short term.

Tuesday in New York, gold for December delivery edged up 20 cents an ounce to end at $1241.40.

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Merrill Lynch issued a 2014 investment outlook that sees less volatility ahead and is less cautious than the previous two years. The firm also cut its outlook for gold, the traditional haven for investors.
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2013-59-26
Tuesday, 26 November 2013 06:59 PM
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