Those who trade gold might benefit from knowing about the wide range of predictions that market participants and experts have been making recently about where the precious metal will go further down the line.
In addition, anyone who is interested in investing in the commodity should know that not only does its value fluctuate substantially, but also that there is significant ambiguity surrounding how its price is determined. There is so much uncertainty regarding the various factors that contribute to the pricing of gold that Ben Bernanke testified before Washington lawmakers last year that he has no idea what gives the precious metal its value.
Gold had a rough year in 2013, plunging almost 30 percent in value. The precious metal declined enough in the beginning of the year to reach bear market status in April, as at that point, it had lost more than 20 percent of its value from the all-time high that it reached in 2011.
In the months after it technically entered a bear market, it continued to depreciate, and managed to fall to less than $1,200 per ounce in June. Around that point, the precious metal reached its lowest value in close to three years. The precious metal managed to recover later in 2013, and it moved into a bull market once again in August.
Gold does well early in 2014
The precious metal has managed to have a rather strong start to the new year, as gold-based exchange-traded funds attracted strong inflows and the commodity also enjoyed substantial appreciation, according to Bloomberg.
Futures for gold rose by 10 percent in 2014 through Feb. 18, the media outlet reported. As a result of this appreciation, these contracts increased to their highest level in three months. Earlier in the month, on Feb. 14, the precious metal rose to as much as $1,318.60 per ounce.
Gold managed to rise above this level on Feb. 19, as futures for the precious metal were valued at $1,320.60 an ounce, and spot gold traded at $1,319.99 per ounce, according to Reuters. In addition, some analysts have predicted that if the precious metal breaks through key areas of technical resistance – at $1,338 an ounce and the value of $1,348 per ounce that was reached in July – that it could enjoy more robust gains.
Accurate analysts bearish on metal
However, even amid this strong performance and the positive statements provided by some analysts, a handful of market experts who have a track record of making accurate predictions have forecast that gold will decline in value soon enough, Bloomberg reported.
One of these individuals, Robin Bhar, who works for Societe Generale SA in London as the head of metals research, told the news source that the recent uptick in the price of the precious metal was merely the market correcting itself. Bhar has predicted that gold will fall to an average price of $1,050 per ounce by the fourth quarter of this year.
The Societe Generale head of metals research is not alone in her bearish predictions for the precious metal, as Suki Cooper, an analyst at Barclays, predicted that in a note released on Feb. 14 that unless there is a substantial change in the attitude of global investors, the upward pressure that the precious metal has experienced thus far will eventually lose strength, the media outlet reported.
In addition, Steve Cortes, founder of research consulting firm Veracruz TJM, recently expressed similar sentiment, according to Talking Numbers, which is provided by both CNBC and Yahoo Finance.
“It’s had a very nice bounce so far in 2014,” Cortes said while on the Talking Numbers portion of CNBC’s Street Signs. However, he noted “but it’s really not that material when you put in the context of last year’s performance. If you bought it a year ago today, you’re still down almost 20 [percent] in gold.”
Hedge funds boost long exposure
While there many seem to be a lot of negative sentiment surrounding the precious metal, gold bugs need not despair, as hedge funds have been increasing their bullish bets on the commodity recently, according to Bloomberg. Data provided by the U.S. Commodity Futures Trading Commission revealed that during the week that ended on Feb. 11, the net-long position of these financial institutions stood at 69,291 futures and options.
This figure represented a 17 percent surge from the prior week, the media outlet reported. It is important to note that during the time frame, there was an 8.8 percent gain in long wagers, which represented the sharpest gain in this measure since March.
John Rutledge, who works for investment house Safanad as chief investment strategist, told the news source that economic weakness in both the U.S. and also in emerging-market nations has helped provide tailwinds for gold over the last few few weeks. Those who trade gold might benefit from knowing about the commentary of this market expert, as he noted that there is substantial ambiguity surrounding whether the precious metal will continue to extend its recent gains.
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