Gold prices are headed down towards $1,500 and will fall below that level over the next three months, according to a Reuters poll of 20 hedge fund managers, economists and traders.
The bleak forecast, which is likely to fuel fears the precious metal is close to ending its long bull run and entering a bear market, comes after gold has lost 11% of its value so far this month, closing at 1598.45 on Friday (a heavy fall from $1,900 this year).
While global physical demand for the bullion remains robust, selling was fueled by many long-term positioned investors liquidating some of their holdings to secure profits, and “by a scramble by hedge funds for cash to meet client redemptions at the end of a difficult year, ” Reuters said.
A run for cash by European banks seeking to raise capital was another important factor in yellow metal’s price erosion. Gold prices dropped more than 7% last week – the biggest weekly loss since September – underscoring the fact that the bearish sentiment in the gold market remains very high as the stress in the financial markets continues to negatively affect safe-haven gold buying.
Almost half of Reuters poll respondents predicted gold will fall to 1,450 an ounce in Q1 2012, with three seeing prices as low as $1,400 an ounce.[Reuters] “What is surprising is that in an environment where headline risk news is bigger than ever, gold has actually fallen from its highs,” said Christoph Eibl, CEO and founding partner of the Swiss commodity hedge fund Tiberius.
“We believe that, in 2012, of all metals gold will be the worst performing,” Eibl said.
Bullion’s plunge below the 1618.43 level, its 200-day moving average, which the metal had held for nearly three years, prompted veteran trader Dennis Gartman to call an end to gold’s decade-long bull cycle.
“We have the beginnings of a real bear market, and the death of a bull,” said Gartman, a long-time gold bull who completely exited his bullion investments last week.
The long-term outlook for gold is no more upbeat either, with more than half of Reuters respondents predicting that gold “is unlikely to stage another run to new all-time highs until at least the second half of 2012.”