Throughout late last year and earlier this year, numerous financial institutions and market analysts forecast gold to significantly dip to anywhere from $900 to $1,100. For instance, Goldman Sachs projected the yellow metal to drop to $1,050 an ounce because the United States economy is getting better.
Now that half of 2014 is over, goldbugs are celebrating because the precious metal has been performing moderately well this year. After a 13-year rally, it fell down substantially last year and financial experts called for its untimely demise and urged investors to avoid gold entirely.
However, according to the World Gold Council (WGC), now would be the best time to purchase gold since the yellow metal has risen 9.2 percent so far this year and it is still relatively cheap. Citing a number of factors to add gold to one’s portfolio, the WGC still thinks there is room for growth moving ahead towards the end of the year.
“We consider that the current environment of high bond issuance, tight credit spreads and record low volatility continues to offer a prime opportunity for investors to add gold,” the WGC stated in its mid-year report. “In our view, gold can reduce overall portfolio risk, and it is cheaper to implement than many volatility-based strategies.”
Essentially, there are three other factors at play here that can entice investors to bullion: higher risk debt is on track to be 30 percent higher this year than in 2013, gold has maintained low volatility and the yellow metal still has its protective vehicle aura.
Despite the fact that investment demand in various other sectors has heightened, investment in gold has been gaining some serious momentum as long positions have increased, shorts have been covered, exchange-traded funds (ETFs) have garnered an influx and coin sales are still on the rise.
Various banks and technical analysts are offering positive sentiment on gold. 24/7 Wall Street spoke with one respected technical analyst who predicted gold would reach to approximately $1,500 per ounce by the end of the year.
Gold traded to its lowest level in three weeks as investors compared a stronger dollar to the growing tensions in the Middle East. The greenback rose to a three-week high when compared to 10 major currencies and soon after the Federal Reserve hinted at raising benchmark rates.
“[Despite] Yellen defending the Fed’s stance to maintain loose monetary policies, the bullion markets seemed to interpret her comments for the possibility of an earlier-than-anticipated rate hike as gold-bearish,” James Steel, an analyst at HSBC Securities, averred in a note. “With the break below $1,300 an ounce and technical weakness, further losses for gold are likely.”
At the time of this writing, gold has gone above the $1,300 mark. Silver, meanwhile, is still just under the $21 threshold.
