© Adam Myers
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Adam Myers
Senior market strategist at Credit Agricole CIB in London
XAU/USD
We are expecting Gold to reach 1550 at the end of Q1 2012 and by the end of the year a further decline to 1150. The number one argument for this forecast is the decrease in investor risk aversion and a peak up in the economic growth in the developed countries, in particularly, the United States. Therefore, a lot of investors will be driven to reduce a long position for Gold. It will also equally encourage renewed inflows into US equity markets, thus lifting the US Dollar. This way we have two impacts from different sides of the equation both acting to sink Gold over the next 3-9 months.
EUR/USD
For the currency pair EUR/USD we forecast a decline as well. We see the Euro falling all the way down from the current 1.29 to 1.26 by the end of December 2012.
In the mid-term we believe there will be a slight rise to 1.31 in March, by the end of Q1. A short period of Euro strength against the US Dollar will be observant, however it will start plunging again. The main reason for the potential Euro weakness after a short period of optimism is that the European debt crunch in terms of fiscal funding challenges will remain a key issue throughout 2012 and this will signify that the Euro needs to devalue versus the US Dollar in order to cushion the real economy from a slowdown in economic activity caused by the financial crisis.