British banking giant Standard Chartered just lowered its gold price forecast by 8 percent according to Metal.com. They’re looking for the yellow metal to average $1,225 this year. That’s nearly 5 percent off the current price ($1,278 at the time of this writing).
Gold prices have been volatile this year rising from $1,220 to $1,340 in an almost vertical climb that started with the new year. That was good for a 10 percent gain. Since then, gold’s given half of those gains back. If Standard Chartered is right, the price is going to keep falling.
SC joins a chorus of big banks that are arguing against the yellow metal. Goldman Sachs (GS) recently reiterated its year-end price target for gold of $1,050. That would be a drop of nearly 20 percent from today’s prices.
I don’t think the price decline will be that steep, but I can’t join in with the gold bulls. I find it interesting that silver and gold prices have continued to trend down despite the ongoing crisis in Ukraine. If that can’t generate some ongoing safe-haven buying, we’d need an all-out war to drive up gold prices and that’s something no one wants to see.
Goldman actually says they see gold prices heading lower for the next two years. It’s hard to argue with them when the metal’s hovering near a 6-month low, and 2013 marked the first annual decline for gold in a decade.
There are just too many headwinds for metals right now. The economy’s improving, inflation is low and the Fed’s talking about tightening monetary policies. While I do believe the government has flooded the economy with too much cash to avoid an extended period of inflation, that inflation isn’t coming in the near-term. Until it does (or the Fed announces some new form of QE) look for investors to put their cash elsewhere. In the interim, I’m betting on bitcoin. Check out my post Bitcoin inflation hedge: The new gold and silver.