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Is gold likely to break a 12-year winning streak?


Is gold likely to break a 12-year winning streak?
The CMP Group, a leading commodities research group in a note on Tuesday said that the average price of gold is expected to fall in 2013 as fading fears of catastrophic market events prompt investors to scale back bullion purchases.

A Reuters report has said that,"The bearish call by CPM Group echoes those from top bullion banks, including HSBC, Goldman and Barclays, which have all slashed their gold forecasts within the last 30 days, citing an improving U.S. economic outlook and a possible end to the Federal Reserve's bond-buying programme. "

Gold prices have had a phenomenal ride since 2000 when the price of the metal was in the range of $280 an ounce to its present closing price $1598 an ounce.

The fears of the metal breaking a 12-year winning streak are real this time round. The metal has been gaining strength ever since there was an economic catastrophe around the world, after the collapse of Lehmann Brothers. Investors took shelter in gold, which always has had a safe haven tag.

Equities were down in the dumps and so was real estate around the globe. This led to a surge in gold price which have rallied 6-7 time since the beginning of the century. Things are different this time around, as economic recovery is gathering momentum.

In fact, three things that are not favouring gold at the moment. One is that the global economic recovery is gathering steam; the second is that money is moving from gold to equities and third is that there is news that US Federal Reserve would withdraw its quantitative easing programme as the US economy recovers.

This is certainly not good news for investors, especially the latter, which could see gold prices tumble if it happens.

Clearly, there are many analysts who are bearish on gold, unless there is economic chaos in Europe or economic recovery around the globe falters. Until then, it's best to stay away from gold.

Read more about: gold
Story first published: Wednesday, March 27, 2013, 10:19 [IST]
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