Poll of experts sees downward trend over next three months after losing 11% this month
Gold prices will fall below $1,500 an ounce over the next three months and are unlikely to retest September's all-time highs until later 2012 at the earliest, according to a Reuters poll of 20 hedge fund managers, economists and traders.
The bleak forecast, coming after gold has lost 11 percent of its value so far this month, is likely to fuel fears that bullion is close to ending its more than decade long bull run and entering a bear market.
Almost half of respondents predicted bullion will fall to $1,450 an ounce in the first quarter next year, with three seeing prices as low as $1,400 an ounce.
The forecasts come after a dismal performance last week when prices hit a 2 1/2 month low of $1,560 and gold lost its safe haven status.
Selling was fuelled by a scramble by hedge funds for cash to meet client redemptions at the end of a difficult year and a run for cash by European banks seeking to raise capital.
"What is surprising is that in an environment where headline risk news is bigger than ever, gold has actually fallen from its highs," said Christoph Eibl, CEO and founding partner of the Swiss commodity hedge fund Tiberius.
"We believe that, in 2012, of all metals gold will be the worst performing," Eibl said.
The market eked out small gains Friday to trade just under $1,600, but showed little sign of strength even after a small bout of short covering took other financial markets higher.
The precious metal is now heading for its first quarterly loss for the fourth quarter after its second-worst rout since September 2008 when the global credit crunch was at its height.
In another immediately bearish sign, US Commodity Futures Trading Commission (CFTC) figures released Friday showed that managed money in gold futures and options cut bullish bets for the second consecutive week.
The long-term outlook is no more upbeat either, with more than half of respondents predicting that gold is unlikely to stage another run to new all-time highs until at least the second half of 2012.
Four said they don't expect a new record until at least 2014.
A lack of immediate monetary easing or stimulus programs by central banks has prompted money managers to turn bearish on gold even though the precious metal is traditionally considered a safe haven in times of uncertainty.
"To me, gold is not attractive right now because we don't see any inflation threats," said Jeffrey Sherman, commodities portfolio manager of DoubleLine Capital, a Los Angeles-based investment manager with $21bn in assets.
Gold has increasingly moved in tandem with risky assets such as equities and industrial commodities. But gold broke ranks last week with a 7 percent decline, which dwarfed a 3 percent drop of the S&P 500.
Bullion's plunge below its 200-day moving average, which it had held for nearly three years, prompted a prominent market watcher to call an end to gold's decade-long bull cycle.
"We have the beginnings of a real bear market, and the death of a bull," said veteran trader Dennis Gartman, a long-time gold bull who completely exited his bullion investments last week.
Since September, gold has underperformed commodities measured by the RJ/CRB index and the euro, while US equities measured by the S&P 500 eked out a slight gain.
In my opinion the capitulation by the weak longs who have no conviction to the fundamentals, the purely hedge fund types like Paulson, Cramer & others), who I believe use gold to try to generate speculative profits during periods of economic instability is an extremely health sign as increasing demand for actual physical gold as collateral for all the rehypothecation taking place is likely to be a primary catalyst to the markets. I see gold as honest money that keeps governments honest about limits how much they can spend The long term value of gold is that it is real money. There are a few great articles I read today that I think anyone serious about gold and silver will find informative.
15 Brilliant Insights From Hedge Fund Superstar Kyle Bass
"Charlatan Exposed: Negative Gold Lease Rates" - AUG Mentor
Pathogenesis of Central Bank Ruin - Gold Seek
"Citi Predicts Gold At $3400 In "The Next Two Years"
"Kyle Bass On Rehypothecation And Other Keynesian Endgame Scenarios
1) Paulson makes (made his) money on fundamentals. Price action humbles all...(especially fundamentalists)...even the distorted kind in a 0% enviroment that we are experiencing. Cramer is a shill and cannot be compared to Paulson.
2) "Honest" Governments...when you see one, please do let us know.
3) No denying Gold is "real" money...but it's volatility due to liquidity pumped into system is what is scaring/burning people these days on the hard sell offs. It's not only (high) prices that are a deterrant...but volatility.
4) What happens if oil trades down to say...$75/Barrel...even $65/barrel??
I'm bullish on PM's but lets not copy/paste what others say and try to pass it off as "my opinion". Welcome to the new normal...where you can't expect more than 6% return per year...but you have to sit through >4% moves per day.
It never fails. Gold goes up some and everybody predicts the sky. Then gold drops some and everybody joins the chorus of gloom. The reality is that nobody knows what will happen in the long run and the trick is to focus on the short-term .
At this writing the daily, weekly and monthly RSI(14) for $GOLD are 33.91, 44.80 and 59.50 (www.stockcharts.com). Note the steady uptrend. The daily lower Bollinger band is also about the same as the weekly lower band and $GOLD had dropped below both of them. These indicators were even more pronounced yesterday when gold was about as oversold as it has ever been. This indicates a near and medium-term underlying bullish trend and any substantial drop from here (usually caused by governmental interference) will only result in a sharp bounce back accompanied by frantic short covering.
As for the "safe haven seekers", they are the perpetual Wrong-Way Corrigans, always entering and existing at the wrong moments and are great contrarian indicators