Investors can benefit from knowing predictions of market experts

By HY Markets Forex Blog

Over the last several years, many different reports have been released that made bearish predictions about the future price movements of gold. Those who want to make money by trading the precious metal can make more-informed decisions by being aware of these forecasts.

Investors who are interested in trading gold should know that many of these predictions are being made at a time when the commodity is on track to record a loss in 2013, after enjoying 12 consecutive years of gains between 2000 and 2012.


Recent depreciation in gold

Gold fell into a bear market in April of this year, having declined 20 percent from its all-time high of more than $1,900 per ounce, which it reached late in 2011. The precious metal then continued to lose ground over the next few months, falling to its lowest price in almost three years in June. At that point, gold dropped to less than $1,200 per ounce.


Investment managers flee the precious metal

Many highly visible market experts started selling their stakes in gold funds in August, according to CNN Money. George Soros, an investment manager, liquidated his entire position in the SPDR Gold Trust ETF during the second quarter of this year.

Hedge fund manager John Paulson, who has been a long-time advocate of the precious metal, cut his interest in the aforementioned gold ETF, which trades under the ticker symbol GLD, by more than 50 percent during that three-month period, the media outlet reported. Paulson’s firm wrote in an email that it had made this move “due to a reduced need for hedging.”


Bearish gold predictions

At a time when many well-known market experts have been selling their stakes in gold, several reports containing bearish predictions for the precious metal have been released. Goldman Sachs Inc. has provided more than one forecast recently that the precious metal will decline in value over the coming years.

The major investment bank sent a note to clients on Oct. 23 predicting that gold will fall to $1,144 per ounce next year, according to Reuters. Goldman Sachs stated that rising inflation-adjusted interest rates, data indicating that the U.S. economy is on the mend and the tapering of quantitative easing by the Federal Reserve could contribute to the future depreciation of the precious metal.


“Gold will likely remain volatile in a $1,250 [to] $1,350/oz range until clarity on tapering,” Goldman Sachs wrote in the note to clients, emphasizing the importance of the plans that the Fed has to reduce its monthly bond purchases, the media outlet reported.

The investment bank also lowered its price prediction for the final quarter of this year, reducing its forecast for the period to $1,320 an ounce from $1,375 per ounce, according to the news source.


Gold a “slam dunk” sell for 2014

On Oct. 8, while speaking on a panel in London, Jeffrey Currie, global head of Commodities Research in the Global Investment Research at Goldman Sachs, stated that the investment bank’s 2014 price target for the commodity was $1,050 an ounce, Bloomberg reported.

He predicted at the time that Washington lawmakers would come to an agreement that would increase the debt ceiling in time for the nation to avoid default, and stated that after this dilemma and also the partial shutdown of the U.S. federal government were resolved, the continued expansion of America’s economy would result in gold being a “slam dunk” sell for 2014, according to the news source.


Currie was not the only person on the panel in London who said that selling the metal would be a wise move next year, the media outlet reported. Ric Deverell, the head of commodities research at Credit Suisse AG, stated that of all his suggestions for those who want to make money via trading raw materials, selling gold is his top one.

After predicting at the event that gold will be worth $1,050 per ounce by the end of next year, Goldman Sachs reiterated its forecast later in October, according to Reuters. The investment bank said at the time that a major variable affecting the price of the precious metal was economic data supporting a more robust U.S. recovery, as such information would be crucial to the reduction of quantitative easing.


Government shutdown and gold

Individuals who want to make money by trading gold should also keep in mind that after the U.S. federal government was partially shut down for more than two weeks, many market experts predicted that the tapering of QE had a higher chance of being pushed back as a result of this particular event.

Pushing back the reduction of these bond purchases made by the Fed could provide upward support for gold over the coming months, as many market experts have stated that the robust bond purchases have served to push the value of the precious metal higher.


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