Analysts bullish on gold in wake of US government shutdown

NEW YORK (Oct 4)  A Bloomberg survey of 30 analysts showed 18 expected gold prices to rise next week, eight expected a fall and four were neutral. The shutdown of the US federal government and political battles over the debt-ceiling are expected to drive investors towards the precious metal.

After a long decline, bullion gained 7.6 per cent in the last quarter due in large part to the surprise announcement from the Federal Reserve that it would not begin tapering of its bond buying program.

Gold has seen a roller coaster ride over the past five years reaching close at $1921/oz in 2011. However this year saw a 21 per cent fall to just over $1315. Worries over political stability in Washington and continued easy money from the Fed may push the price of gold higher the immediate term, but as growth begins to accelerate in the US and the Fed starts to taper its bond buying program some analysts believe the appeal of the precious metal will likely decrease.

Goldman Sachs estimates that that gold may drop to as low as $1050 a ounce by the end of 2014 with Credit Suisse Group forecasting $1180. However some gold bulls believe that the Fed is now trapped into keeping markets buoyant with constant QE and that gold remains safest store of value with potential for a dramatic rise over the longer term.