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Gold prices to drop $500 to reach $1,200/oz in 2013: Saxo Bank outrageous prediction

Danish online multi-asset trading and investment specialist Saxo Bank in it's ten Outrageous Predictions for 2013 said gold will fall by around $500 to $1,200 per ounce.

The bank attributed the forecast on faster US growth and a stronger US dollar despite the overhang of Fed's easy monetary policy.

This is Saxo Bank's annual exercise in rooting out relatively extreme market and political events for which the probability is perhaps low, if still vastly under-appreciated.

Among these predictions is that Germany will move toward accepting the mutualisation of Euro debt, which combined with other strains could cause the DAX to plunge by about a third from near multi-year highs to 5,000.

Other events Saxo Bank believes would have a significant impact should they come to pass include Spanish interest rates rising to 10 per cent despite the ECB's OMT mechanism as Greece exits and social tensions rise, and the un-pegging of the Hong Kong Dollar (HKD) from the USD and its re-pegging to the Chinese Renminbi as China attempts to take more control of its economic destiny away from the US and its central bank's policies.

Regarding soybeans, bad weather during 2012, which wreaked havoc on global crop production and saw a nine-year low in US soybean ending stocks, leaves the price of new crop soybeans exposed to any new weather disruptions, either in the US, South America or in China.

Increased demand for biofuel will also play its part in exposing the price to spikes, and speculators will be ready to re-enter the market, pushing the price higher by as much as 50 per cent.

Food security becomes a buzz phrase US energy production continues to rise, primarily through advanced production techniques such as in the shale oil sector.

US production of crude oil rises strongly, and with domestic inventory levels already at a 30-year high and export options limited, WTI benchmark crude oil prices come under renewed selling pressure and slump towards $50 per barrel.

Global gold prices ended the United States day session solidly lower on Thursday and hit fresh four-month lows. A batch of fresh U.S. economic data Thursday that was stronger than expected helped to pressure the yellow metal.

The most active February gold last traded down $20.10 an ounce at $1,647.50 on the Comex division of the New York Mercantile Exchange. Spot gold was last quoted down $19.30 at $1,647.00.