Is gold a bear or a bull in the near-term? It all depends on who you ask.
For the past two to three years, gold has been involved in a precarious situation. Last year, it started off the year strong, which may have been a hint that it would exponentially climb again. That did not happen. In the past month, the yellow metal has traded higher again, but will this trend remain on course for the next 10 months?
Industry insiders say that the precious metal will likely experience another down period this year and then bottom out. Meanwhile, global demand for gold is projected to be in a positive state, though not by much – China is forecast to increase its appetite for bullion, while Russia’s demand is vast.
According to a report released by Gold Fields Mineral Services (via The Dollar Business), gold prices are slated to average about $1,170 per ounce this year. Goldbugs say this is a signal of a reversal in the current bear market which has been ubiquitous for the past two years.
London Bullion Market Association (LBMA) of 35 analysts say gold will trade relatively flat this year and average at a little over the ever important $1,200 threshold. Other gold traders expect it to trade between $950 and $1,350.
On news of the European Central Bank’s (ECB) quantitative easing measures and Federal Reserve Chair Janet Yellen’s remarks to the Democrats that an interest rate hike won’t happen immediately, both gold and silver traded higher overseas at $1,226.29 and $17.01, respectively.
With the paucity of intense volatility in the gold market, the global demand, particularly by central banks, will be a significant factor on the price of gold this year. Due to the various central bank measures to weaken their own currencies to fight off the threats of inflation and other market elements, gold may very well enter a bull market once the year is over.
“For the longer-term there are a number of forces in place; the Swiss National Bank abolition of the Swiss franc/euro cap is arguably bullish, as is the fall in the oil price — over 60 percent of jewelry demand comes from countries that benefit substantially from lower oil prices,” said a report from analytical company GFMS last week.
In order to save its economy and currency, the Russian Federation has substantially revved up its inventory of gold. Last year, amid the collapse of the ruble and the erosion of the national economy, the Bank of Russia acquired an estimated $6.1 billion in gold during the first 11 months of 2014, which is 123 percent increase.
“This is a clear positive for the gold price,” said Matthew Turner, analyst at Macquarie, according to Russia Today. “If central banks had not purchased that gold it would have been bought by private investors or jewelry consumers, and this would likely have required a lower gold price.”
Peter Schiff, president of Euro Pacific Capital, told Yahoo! Finance last week that the Fed’s fourth edition of quantitative easing may push gold higher.
Although there was talk of another round of QE last fall because of volatility in the markets, there hasn’t been much talk since then. However, Schiff thinks it’s inevitable that such an action will unfold and that a rate hike will be nearly impossible because of all the debt the nation has taken on.
“In fact this year I believe gold prices are going to hit all time record highs in just about every major currency except the U.S. Dollar. We might have to wait until 2016 before gold prices hit a record high in dollars,” said Schiff. “When the Fed announces QE 4, that’s gonna be a big game changer. It’s gonna catch everybody by surprise.”
Gold hasn’t made business headlines since it reached close to $2,000 a few years ago. With falling oil prices and an economic recovery making the news every day, the yellow metal may roar back and be the talk of the town.
