Have Investors Got The Outlook For Gold Price In 2015 Dead Wrong And Gold’s Going To $1,650?

December 26, 2014

Holdings in the SPDR gold exchange traded fund fell to 712.9 metric tonnes before Christmas, the smallest amount held by the fund since September 2008. You can argue about price manipulation but actual physical holdings are a clear indication that many investors don’t think they need a gold hedge and indeed are worried that the price will fall further in 2015.

Bloomberg summed up their reasoning: ‘A collapse in oil prices is curbing demand for the metal as an inflation hedge, while the Federal Reserve is moving closer to raising interest rates. Gains for the dollar and US equities have also made gold less attractive as an alternative asset.’

Negative forces

But how likely are these factors to continue in 2015? Could we be close to the bottom for gold prices or even past it now?

Saudi Arabia is budgeting for an average $80-a-barrel oil price this year, and it should be able to drive the oil price back up to meet this target if anyone can. The US economy looks ready to raise interest rates mid-year, particularly in view of the stellar five per cent GDP growth figure for the third quarter.

Except that figure is a fraud. Two-thirds of this is the Obamacare effect that statisticians disastrously dropped from Q1 GDP number, and the rest is inventory building for an assumed consumer spending recovery that may not follow through again. Perhaps the Fed will have to be more ‘patient’ than expected in raising interest rates next year or cut them like the eurozone and China.

And what about US equities sat at an all-time high? Where’s the next reason for buying stocks going to come from? Might we at long last have all the good news written into stock prices and some fraudulent data too? And what about some of the bad news like the still weak housing market and fall in durable goods orders in November?

Currency guestimates

OK so what could work against the US dollar? Most currency experts think its rise-and-rise is a no brainer for 2015. Well perhaps some of the currencies that have depreciated against the dollar the most this year are due for a bounce back. The ruble has must managed to claw back from 80 to 50-55 to the dollar, what else is looking oversold?

Gold of course! And as investors realize that their current prognosis for 2015 is wrong or falls rather short of expectations then the gold price will go up and up. Rather like the Chinese buying every drop of oil in the world that they can right now those stocking up on gold today are doing the sensible thing.

If oil is going to average $80-a-barrel this year then it has to rise 40 per cent from current levels by the second half. If gold does the same it will be $1,650 later this year.


Courtesy of http://www.arabianmoney.net

Peter Cooper has been a senior business and financial journalist for 20 years. Since selling his dot-com news website before the global financial crisis he's been a gold and silver investor. Cooper studied politics, philosophy and economics at Trinity College, Oxford University. He was 'financial journalist of the year' in the UK some 25 years ago for his scoop on the privatization of Russian real estate, the largest privatization of public property in history. You can reach Peter at: dubaijournalist@gmail.com.

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