--HSBC reins in 2012, 2013 gold forecasts

--Cites "likely global deflationary pressures due to contractions in the
banking industry and deleveraging"
--Says, however, that it remains bullish on the market
--Leaves silver forecasts unchanged
(Adds comments and price forecasts throughout.)
LONDON (Dow Jones)--HSBC has lowered its gold price forecasts for 2012 and
2013 after the market weakened significantly in the final quarter of last year,
but said it remains bullish on the yellow metal as a poor global economic
outlook and sovereign debt troubles spur fresh demand for bullion as an
alternative store of value.
The bank now expects gold to average $1,850 a troy ounce this year, down from
an earlier forecast of $2,025/oz, precious metals analyst James Steel said in a
note to clients late Wednesday. HSBC--one of 11 market-making members of the
London Bullion Market Association--has also reduced its average 2013 forecast
to $1,800/oz, from $1,850/oz, he said.
There are "likely global deflationary pressures due to contractions in the
banking industry and deleveraging which we believe may limit gold advances, and
this helps explain the reductions in our forecasts," Steel said. "[But] we
believe that gold prices will recover in 2012, and we maintain our bullish
posture," he added.
At 1307 GMT, spot gold in Europe traded at $1,611.44/oz.
Gold prices weakened significantly in the final quarter of 2011 amid heavy
margin call-related liquidation as risk assets declined. Emerging market demand
was also weak, particularly in India after a sharp rise in domestic prices.
The bullion market should, however, "ultimately benefit from any negative
global economic conditions," Steel said.
For the year ahead, he estimated a wide trading range of $1,450/oz to
$2,050/oz. HSBC also introduced a new 2014 forecast of $1,750/oz, and left its
long-term forecast of $1,500/oz unchanged.
The bank also kept its 2012 and 2013 forecasts for sister metal silver
unchanged at $34/oz and $32/oz. Steel said a trading range of $27/oz-$38/oz is
expected this year. "We are bullish on silver, based on solid retail investment
demand for coins and small bars. We expect silver ETF demand to recover this
year, and based on HSBC Economics' forecasts of industrial production, demand
for silver from manufacturing should grow moderately," Steel said.