Not exactly rocket science, is it? But the point is that the experts are split on which direction the gold price is going to go, which means they are probably also split on what the future holds for the usual suspects for which gold is held – a hedge against inflation, currency moves and so on.
Two years ago, gold was less than $1,000 per ounce and $1,500 a year ahead was talked about, a target it reached and comfortably exceeded so talk soon changed to $2,000 or even $2,500 an ounce. Today, it has settled at a mid-point, of $1,572 at the end of February.
The interesting bit will be what happens next as there is no consensus.
To show the divide, Bloomberg surveyed a number of analysts asking for their short-term expectations. Of those, 15 expect short-term gains, 14 were negative and three sat on the fence.
On the positive side, last year demand for gold last year hit an annual record, with demand for $236.4bn by the end of December with Q4 demand – itself a record high – of $66.2bn according to the World Gold Council.
Again through Bloomberg, Mark O’Byrne, the executive director of bullion brokerage GoldCore, said: “Sentiment is the worst we have seen it in recent years and therefore is due a bounce. Gold is oversold on a host of benchmarks.”
So what do investors think?
Here the view is more negative.
Investors sold a per-month record amount of gold in February, offloading 109.5 metric tons from exchange-traded products (ETP). George Soros himself cut his gold allocation through the SPDR Gold Trust (the largest gold ETP) by more than half.
Xavier Denis, chief economist, Société Générale Private Banking sees the negatives but still feels it is worth a punt, saying: “We do not see significant upside and even anticipate potentially some weakness for gold in the coming three months. We nevertheless consider that current prices are a good entry point.”
He sees demand picking up as we go through 2013 on the back of a “fear of currency debasement that translates into a search for an inflation hedge”, retail and central bank interest and a gradual exit from the financial crisis.
Edward Smith, global strategist at Collins Stewart Wealth Management, nailed his colours squarely to the mast by describing where we are now as the beginning of the gold bear market that could its price fall $1,000 by 2015.
“If you believe that today’s gold price is the manifestation of an anticipated reversion to the gold standard and collapse of fiat money – and that our model is broken – then continue to ready the vaults,” he argues.
“But if you believe that the major disinflationary threats have receded, and that we are entering a prolonged period of weak growth in which most major currencies are due to devalue against the dollar, gold should be far less attractive.
“With or without a gold standard, gold is still an alternative currency.”
So glad that is all clear then…
What do you think?
