Gold wasn’t just bad in 2013. It was horrendous.
Gold prices plummeted last year to mark its worst annual performance in 32 years. Specifically, gold prices per ounce finished out at $1,202 — a decline of nearly 28%, which was last trumped in 1981 when gold sunk 33%.
That performance also was reflected in the SPDR Gold Shares (GLD) exchange-traded fund, which gave up roughly the same amount (28%) for 2013, and miners’ profit margins were obliterated, leading to widespread losses in that sector. The Market Vectors Gold Miners ETF (GDX) was more than halved.
So, 2014 has to be better for the little yellow metal, right?
Depends on who you ask. Five of InvestorPlace’s experts have sounded off on the fate of gold for 2014, and not everyone sees eye to eye. Here’s a look at what each had to say about gold prices in the new year:
Jeff Reeves: Necklaces Won’t Counter GLD Selling Pressure
The spot price of gold moved downward across nearly all of 2013. And while I don’t expect another 25%-to-30% decline for gold prices, it’s reasonable to expect downward pressure to continue and for gold to finish the year down slightly from where it is right now.
Gold prices per ounce are being affected big-time by the investor exodus from the precious metal, thanks to redemptions from asset-backed funds like the SPDR Gold Shares (GLD). As investors look to a red-hot stock market instead, the lack of demand is simply gutting the spot price of gold.
You’ll hear a lot about foreign central bank demand or nations like India and China gobbling up gold. But the GLD fund alone lost about $24 billion in assets across 2013 — and that kind of selling pressure can’t be offset simply by more emerging market consumers buying jewelry.
Serge Berger: Trade Gold, But Don’t Hold It
Head Trader & Strategist, The Steady Trader
Most investors have a choice of looking at gold as either a long-term holding and diversification play, or something to trade within a multiday/multiweek time frame.
Those with the former position have hopefully been taught since the top in 2011 that gold, just like any other asset class, can move down as well as up. For the more trading-oriented crowd, the SPDR Gold Shares (GLD) ETF has offered plenty of opportunities in recent years, but one had to keep the trend (lower) in mind.
When looking at gold, one cannot look at it in a vacuum, but rather must consider its relative stands vs. other asset classes. Considering that we are in an environment where equities look to be trading toward the end of a cyclical bull market, but in the beginning of a secular bull market, while interest rates are trending higher, I continue to see the trend lower in gold for 2014.
From a trading perspective however, I expect to see at least one good bounce in gold in 2014, likely when folks realize growth has been slowing at the margin, which would then usher in a 5%-10% correction in equities.
Charles Sizemore: Gold Won’t Shimmer in 2014
Editor, Macro Trend Investor
Gold had a rough 2013. With a loss of 28% on the year, the spot price of gold was down by nearly the same percentage that the S&P 500 was up. And I don’t expect gold to regain its shimmer in 2014.
Let’s take a look at the macro environment as we enter the new year:
- The inflation that gold enthusiasts have feared since the onset of the 2008 crisis is dead on arrival. The latest CPI figures show an inflation rate of just 1.2%, and energy prices are actually falling.
- The quantitative easing that fueled the inflation fears of the past few years is already being tapered, from $85 billion in bond purchases per month to $75 billion per month … with more tapering to come.
- The Federal budget deficit, though still far too high, continues to fall and is expected to be just 3.3% of GDP in fiscal year 2014.
- Gold miners are contemplating hedging their risk by selling their production forward, which will effectively cap the price of gold (and sends a very negative signal to the market).
- Hedge funds and other large institutional buyers — the driving force behind much of the rise in the spot price of gold in the past decade — appear to be abandoning gold if the outflows from gold ETFs are any indication. Gold ETF holdings are now at their lowest levels since 2008.
- Gold now has competition in the anti-establishment crowd from Bitcoin and other “virtual” currencies. (I think Bitcoin is a joke, mind you, but that doesn’t mean that it won’t continue to steal gold’s thunder for a while longer.)
And on top of all of this, we should remember that gold had a monster secular bull market run that lasted 12 years. When the last bull market in gold broke, in 1980, it took two decades for it to finally find a bottom.
I try not to spend much time on specific price targets, as I see these as being something of a distraction, but I expect the spot price of gold to finish in the range of $1,000 to $1,100.
Tom Taulli: Gold Will Have an Easier Go in 2014
Editor, IPO Playbook
Despite many investors and analysts predicting a decent year for gold in 2013, the yellow metal did not have much luster in 2013. In fact, it was outright dirty, with the spot price of gold suffering its worst rout since 1981.
That’s pretty ominous, and has me worried about that period from 1981 to 2000 where gold was dead money. It was brutal.
But that’s not to say there will be a repeat performance.
This time around, there’s much less supply, and with gold prices sitting around $1,200 per ounce, miners have even less incentive to pump up production. The costs are just too prohibitive.
Also, going forward, the U.S. is likely to see more pressure on inflation. The Fed has taken unprecedented efforts to crank liquidity, which much of it going into equities so far. But as the economy continues to improve, we should see consumer prices start to inch north.
At the same time, bearishness for gold is at extreme levels as many investors have taken heavy short positions. So any signs of inflation or adverse geopolitical events could put the sparkle back in gold in 2014.
Dan Burrows: Gold Doesn’t Have to Rebound
Feature Writer, InvestorPlace.com
After plunging 28% last year, you might think the SPDR Gold Shares (GLD) is a bargain.
Forget about gold in 2014. There’s no law that says the precious metal and related ETFs have to bounce back after a brutal year. Indeed, the current bear market in gold started in 2011, and the key driver supporting a higher spot price of gold and rising gold prices per ounce is long gone.
That would be fear, which has subsided considerably. Central bank stimulus stoked fears of rampant inflation. That didn’t happen. Fears of economic, financial and political collapse were greatly diminished when Greece, Italy, Spain and Cyprus didn’t destroy the euro. Like a Harold Camping prediction, the apocalypse failed to materialize.
A higher spot price of gold and rising gold prices per ounce require fear — abundant fear. With the worst of the euro crisis behind us and the central bank tapering its bond-buying program, there isn’t sufficient end-of-the-world anxiety to make gold a winning bet.
At least until the next global crisis.