Gold Experts Are Bearish On The Yellow Metal [SPDR Gold Trust (ETF), iShares Gold Trust(ETF), ProShares UltraShort Gold (ETF), ProShares Ultra Gold (ETF)]

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April 8, 2014 1:44pm NYSE:DZZ NYSE:GDX

record gold holdingsJan Skoyles: Despite a sharp jump in equities and low demand in China, the gold price jumped up by 1% this morning thanks to technical buying post rising above $1,300.


Safe haven demand, due to events in the Ukraine, continues to support the price after rallies following NFP data fizzled out. Silver and the PGMs also climbed by about 1%.

Bearish predictions on the gold price

In a new report from Morgan Stanley, we learn that gold is their least preferred commodity as the factors that boosted gold in Q1 are, apparently, no longer evident today.

One of those alluded to by analyst Joel Crane is the Ukraine situation that boosted safe-haven demand.

Something that Morgan Stanley believe will no longer be a major driver in this year’s gold price. Having said that, tensions increased once again yesterday and the bank have increased their average 2014 price by 5% to $1,219/oz.

Bloomberg reports, ‘“As many of the factors that supported prices in the first quarter dissipate, we believe the gold price is set to resume a declining trend,” Crane wrote. Over six months, equities, credit and the dollar are favored over haven assets, he said.’

This sentiment is something that has been acknowledged by Goldman Sachs’ Jeff Currie, who believes the factors that drove the gold price up in the first quarter were ‘transient’ and as the US begins to recover there is unlikely to be much support for the gold price.

Realistically, gold overreacted when tapering was first announced, and any meaningful tightening from the FOMC on monetary policy, or any other central bank for that matter, is unlikely.

We should also look to increasing demand from India as the price falls and restrictions are relaxed.

Despite the above, unfortunately even those who work in the gold investment industry are feeling bearish about the 2014 gold price.

The three-day Dubai Precious Metals Conference came to a close yesterday with many of the participants giving their forecasts for gold and silver this year.

John Hathaway was apparently a lone voice in predicting a rise in the gold price.

Ross Norman, the LBMA’s most successful price forecaster, is downbeat about the price and believes it will be no higher than $1,350 an ounce by the end of the year.

A low gold price, yet low Western demand

In the West we have an interesting tendency to be put-off buying something when the price is low.

Houses are a good example of this, but gold and silver are the best ones.

Whilst fans of gold in Dubai may be predicting lower prices, this does not come hand-in-hand with a reduced need to invest in gold.

If anything this is a better opportunity to buy gold than we have seen in recent years.

Those factors that drove gold up, as mentioned in the Morgan Stanley report, still very much exist.

If the cost of insurance falls does this mean you no longer choose to have any?

FOMC minutes ahead

Tomorrow the minutes from the most recent FOMC meeting will be released.

Market participants will be looking out for any indication of interest rate hikes in the next 18-months.

Gold will be watching the US dollar following the release, the reserve currency has floundered somewhat in the last few weeks as weak economic data has put in under some pressure.

This article is brought to you courtesy of Jan Skoyles  from The Real Asset Co.


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