Gold rose every year from 2001 to 2012, but in 2013, gold declined for the first time since 2000. Will gold decline again this year? We're close 2014's starting point, at $1,208 an ounce. Some New York analysts are crowing that their forecasts of $1,150 to $1,200 gold by year's end might come true after all.
Anything is possible. Most investors don't like to jump into a declining investment. It's like "trying to catch a falling knife," they say. Whatever trend is in force tends to stay in force . . . until it doesn't.
Most investors wait to see a clear rise before jumping on board. While they might miss the strong early surge that way, they feel safer waiting for skies to clear up before buying. For now, they assume that the dollar will keep rising and gold will keep falling, but wise investors look to the long run, not the day-to-day market.
Thomson Reuters GFMS, a leading metals consultancy service, says that the gold bull market might not resume until mid-2015, and then only "gradually" at first. In a recent update to their Gold Survey 2014, GFMS says, "We believe it will take prices in a $1,200 to $1,250 range in order for physical buying from Middle Eastern, East and South East Asian markets to begin to increase." Demand in Europe, they say, will pivot on the perception that inflation is returning, rather than the deflation Europe is facing now.
GFMS sees a test of $1,200 before the year is over. Gold might meet (or fail) that test, but in the long term the fundamentals will lift gold higher – more central bank buying, a return to a weaker dollar, the slowdown in gold discoveries (due to lower prices) and an overall decline in new gold supplies. Rising demand from consumers and central banks and slower supply growth inevitably lead to higher prices.
About the Author: Mike Fuljenz
Mike Fuljenz is a member of the Moneynews Financial Brain Trust. Click Here to read more of his articles. He is also the editor of the NLG award-winning Michael Fuljenz Metals Market Weekly Report.
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