Is the Worst Finally Over for Gold?
The recent price movement of gold has been extremely bearish. Despite logging twelve consecutive annual gains, the precious metal is one of the worst performing assets this year. However, with sentiment at rock-bottom levels, the worst may finally be over.
Over the course of only two days in April, gold plunged $200 to reach its lowest level since February 2011. In the process, gold posted its worst one-day percentage drop since 1980, and the largest fall in dollar terms on record. On a technical basis, gold reached its most oversold reading since at least 1975. The dismal performance was followed with a 5.4 percent loss in May. In fact, gold has now declined for seven of the past eight months.
Last month, several well-known firms lowered their price targets for gold. Credit Suisse Group believes the precious metal will trade at $1,100 an ounce within a year, and below $1,000 in five years. Ric Deverell, head of commodities research at the bank even said, “Gold is going to get crushed.” Meanwhile, JPMorgan Chase (NYSE:JPM) cut its outlook for gold in 2013 to $1,595 an ounce, compared to its previous forecast of $1,745. The bank’s 2015 forecast was reduced 5 percent to $1,650 an ounce.
Some investors have become discouraged with gold’s performance, but demand is not as bearish as one might think. In the first quarter of 2013, total gold demand reached 963 tonnes, representing a 13 percent drop from a year earlier, according to the latest report from the World Gold Council.