Central bank policies likely to remain supportive for gold: BNP Paribas

NEW YORK (Scrap Monster):  Policies of central banks to supportive for gold down the road, said BNP Paribas in a research note.

According to BNP Paribas, the market has fallen since a Feb. 29 speech by Federal Reserve Chairman Ben Bernanke did not allude to any further quantitative easing. Still, the relationship between gold and negative real interest rates remains supportive.

Further, “our economists believe that further monetary accommodation is more likely than not in 2012, although the timing is proving more elusive. News reports suggest that this next round of U.S. monetary injection could potentially be sterilized to avoid inflationary pressures, but it would nonetheless be supportive of gold prices insofar as it would lower interest rates and weaken the U.S. dollar. Abating inflationary pressures in H1’12 in some emerging markets may open the door to looser monetary policy,” BNP added.

The potential absence of more U.S. easing is the main downside risk for gold. “While this may have negative implications for the gold price, it would not alter the overall direction of our price profile,” the bank continued, commenting that central banks in other OECD economies have maintained monetary accommodation.

BNP Paribas earlier this week reiterated its gold forecasts of $1,850 an ounce for 2012 and $2,225 for 2013.