Five Forecasts For Gold In 2014

What have top analysts from domestic and international financial institutions forecasted for gold in 2014? How accurate have they been so far? What does the consensus seem to be? Try to conclude for yourself after reading summaries of their predictions below. This year has seen gold’s best start since 1983, but you may be surprised by what analysts and major financial institutions are saying despite that fact.

Robin Bhar

Robin Bhar is head of metals research at Societe Generale SA in London and, out of all of the analysts tracked by Bloomberg, the most accurate gold forecaster in the past two years. He expects a Q4 average of $1,050/oz., and advises that despite gold’s rebounds so far this year, “We would still want to be bearish about gold.”

Justin Smirk

Justin Smirk is a senior economist in Sydney at Westpac Banking Corp. and the second most accurate gold forecaster that Bloomberg has tracked over the last two years. He expects a downward slide throughout the year to a Q4 average of $1,020/oz., just $30 less than Bhar’s prediction. “Haven demand plays well when gold is cheap, but it’s no longer cheap,” he said to Bloomberg.

Goldman Sachs

Goldman Sachs believes despite gold’s 11% rise, it is a rally driven by catalysts that cannot be sustained. Sachs predicts three factors in particular – US economic activity being impacted by poor weather, concerns about a trade deficit with China, and the tensions in Ukraine – will diminish in the future and cause gold to lose its appeal as a safe-haven investment (similar to Smirk’s sentiments) and drop its price. Like Bhar, Sachs sees gold falling to $1,050/oz. at year’s end, a 22% decrease from its current value. They see an escalation in US and Chinese economic activity once conditions such as the weather improve, which will drive down the gold price.

Deutsche Bank

Deutsche Bank forecasts gold’s average 2014 price at $1,141/oz, a large dip from 2013’s $1,413/oz. average. This prediction is in line with that of other financial industry giants such as Bank of America Merrill Lynch. Deutsche’s analysts also lowered their expectations for silver and oil. They blame the Federal Reserve tapering its bond-buying program, and a stronger value of the US dollar, among other factors.

Bank of America Merrill Lynch

Very close to Deutsche Bank’s estimate, Bank of America Merrill Lynch predicts gold will be at an average of $1,150/oz for the year, and warns that it could get worse. They also lowered their silver prospects. Michael Widmer, one of their strategists, blames lack of buyer interest: “If investors stopped selling gold, prices could stabilize around $1,200/oz. Yet, this is not our base case and a more likely scenario is for investors to continue reducing their exposure. Our model suggests that this could take prices down to $1,000/oz.” Like Sachs, Widmer also thinks further acceleration in the US economy will soothe inflation concerns and drive down gold’s price.

Orkan Ozkan

American Bullion CEO Orkan Ozkan views long-term gold prices in a different way than the previous five predictions. He puts it this way: “Investors should definitely follow the daily prices, but should not be too concerned. In the financial world you can never guarantee anything, but I can comfortably say that gold has always been a long-term buy and hold. You buy gold and forget about it until you need it, because unlike paper assets, you can always count on gold no matter what happens in the world.”

The major sentiment here seems to be a bearish outlook – in other words, downward trend predictions. Each strategist/institution looked at multiple different factors, and which factors are the least and most important made up most of the similarities and differences in predictions. MarketWatch calls those making these types of predictions members of the “gold is pretty doomed camp.” On the flip side, lower gold prices signal an opportunity for value investors looking to move some of their winnings from the all-time highs in the market into the yellow metal at a four-year low.

Remember that these are just the informed opinions of financial analysts who cannot predict the future. The market is unpredictable and prices can go any which way, despite forecasts. The word of analysts isn’t always worth its weight in gold.