Is the 14-year bull market in gold winding down? As equities rally early on in 2013, some are betting that the run-up in gold is over, evidenced by the poor performance of the metal and related exchange traded fund in the fourth quarter.
“Many analysts have declared that the bull market for gold is over and that its price will not advance much further than $1,700 per ounce,” John Nyaradi wrote for MarketWatch. [Gold ETFs: Bullion Prices Up for the 12th Straight Year]
Meanwhile, Goldman Sachs commodity analysts introduced a new call: gold at $1,200 an ounce by 2018, Business Insider reports. The analysts think an improving economy will lower demand for safe-haven assets like gold, and they expect interest rates to rise. Also, outflows from gold-back ETFs would speed a decline in prices, they said.
Gold prices and the largest focused ETF, SPDR Gold Shares (NYSEArca: GLD), have been in a downtrend since the fourth quarter of 2012, although the 200-day simple moving average has provided support recently.
China’s role in gold’s performance is a huge factor. Gold imports for China in 2012 are exceeding acquisitions in 2011 by a few hundred tons and the physically-backed gold ETF is about to debut in the country. [Tom Lydon Outlines the Case for Holding Gold ETFs]
However, central banks are still buying up physical gold and inflation is another factor that looms in the near future. Since so many banks are printing currency, gold is the safe haven that will hold its value. Plus, many investors are weary of paper money and financial markets at this time. These are reasons why gold can continue in bull market mode.