Nearly half predicted that the gold price will fall to $1,450 per ounce in the first quarter of 2012

The gold price climbed $18.19, or 1.1%, to $1,610.87 per ounce Tuesday closing as the U.S. dollar declined against a basket of the world’s leading currencies. Silver advanced alongside the the price of gold by $0.57, or 2.0%, to $29.36 per ounce, as the commodities complex was bolstered by the weaker dollar.

With the current year winding down, Reuters polled 20 hedge fund managers, traders, and economists on their outlook for the price of gold in 2012. Given the considerable sell-off in recent months, it was not surprising that most respondents were quite cautious on the yellow metal’s prospects for next year. Nearly half predicted that the gold price will fall to $1,450 per ounce in the first quarter of 2012, and that gold is unlikely to reach a new all-time high until at least the third quarter.

Reuters cited “a lack of immediate monetary easing or stimulus programs by central banks” as the primary reason respondents were bearish on gold’s prospects in 2012. Jeffrey Sherman, commodities portfolio manager at DoubleLine Capital, commented that “To me, gold is not attractive right now because we don’t see any inflation threats.”

The gloomy outlook of the Reuters poll echoed other recent measures of gold sentiment, including MarketVane’s Bullish Consensus reading. At 58%, the MarketVane report came in at its lowest level since December 2008, immediately after the depths of the financial crisis. Last week the Hulbert Gold Newsletter Sentiment Index (HGNSI) reached 0.3%, indicating that “the average gold timer is essentially keeping all of his gold-oriented portfolio out of the market,” according to HGNSI founder Mark Hulbert.

While the sentiment data reflects investors’ somber mood toward gold, a contrarian perspective indicates that now is far from the time to be turning bearish on the gold price. Throughout the 11-year bull market in gold, extremely low sentiment levels – as witnessed currently – have been associated with intermediate-term bottoms in the price of the yellow metal. Although it is quite difficult for investors to pick the exact bottom in the gold price, the data suggests that the risk-return setup for gold has become quite favorable at the present time.

Comments

Post a Comment

Popular posts from this blog

Gold edges up on weaker dollar, dovish U.S. Fed policy bets

Image
 Gold edged higher on Monday, helped by a weaker dollar and expectations that the U.S. Federal Reserve will reiterate its dovish monetary policy stance this week. Spot gold was up by 0.1% at $1,943.58 per ounce. U.S. gold futures rose 0.1% to $1,950.10 per ounce. “Gold is firm on the basis that the Fed could adopt a further dovish message with respect to average inflation targeting,” said Michael Hewson, chief market analyst at CMC Markets UK. “If you want to have a policy of average inflation targeting, you’re going to have to go into detail as to how you are going to arrive at that particular outcome.” The dollar retreated on Mond ay, bolstering gold’s appeal for investors holding other currencies, ahead of the Fed’s policy decision due on Wednesday. “If inflation forecasts remain at 2% or below, this could offer gold a tailwind as the zero-yielding metal thrives in a low-interest rate environment,” said FXTM analyst Lukman Otunuga. Market participants are also waiting
Read more

For the gold price, two outcomes are possible.

Image
For the gold price, two outcomes are possible. First is a return to or near the April low ($1,277.40). Second is a drop to a lower low, $1,240 - $1,260. Yet a third possible outcome is that the June and December lows were not a double bottom and one further drop may come. I account that the least likely, and look for a low here by the end of the week, but I'm no more'n a nacheral born durnd fool from Tennessee, so what do I know?   You'd think that an institution charged with promoting the gold industry would produce reports that at least cast the best light on gold's prospects. You'd think wrong, if you're thinking about the World Gold Council. They've been negative on gold for, oh, the last 14 years or so. Today they issued a report that contained a nugget about Chinese business using physical gold as collateral for bank credit ($40 bn worth) but they managed to tease a gloomy forecast even out of this inventive monetary use. That and bad
Read more

The price of gold advanced as high as $1,603.40 per ounc

Image
The gold price broke out to a new all-time high above $1,600 per ounce Monday morning, rising for the eleventh consecutive trading session. The price of gold advanced as high as $1,603.40 per ounce before backing off to trade just the $1,600 level. The yellow metal gained on the back of a surge in borrowing costs for Italy, the latest European nation to see its bond market come under heavy selling pressure. The lack of a deal to raise the $14.3 trillion debt ceiling also helped boost gold prices. The eleven-day rise in the gold price is the longest winning streak since January of 1980. The gold price delivered another noteworthy performance last week, climbing 3.2% on its way to a series of fresh record highs. With Monday’s advance, the gold price extended its monthly and year-to-date gains to 6.6% and 12.5%, respectively. Last week’s two-day Congressional testimony by Chairman Ben Bernanke on the economy and monetary policy revealed that the Fed remains open to the
Read more