Gold and Silver

Gold's Future Prospects: 2014 and Ahead

Date: January, 2014
From the later half of 1999 to the later half of 2011, Gold had seen one of the finest bull runs which saw it rise close to 665% from $251 to $1920. This 12 year bull run thus ended in late 2011 and set on a phase of correction and consolidation and in 2 years gold fell close to 38.5% in value. Throughout the globe, analysts and investors are divided on what lies ahead for gold, some predict another 700% run in the coming decade while some predict $500 in the same timeframe. Then there are those who say: Gold currently in 2014 is at $1200, we have a price target of $1230 in the next 2 years. End of the day, the markets don't follow anyone's analysis and someone or the other will claim the fame by predicting it correctly (Even a clock that doesn't work shows the right time twice a day). For a clearer picture, let's look at the monthly chart of GOLD since 1999.

Gold: Monthly Chart
The end of the 12 year old bull run has kicked off a period of correction and consolidation. Throughout history, Gold has it's importance as one of the brightest dreams of humanity and there is no such reason that it is a bubble and that it is over forever. Gold is trusted by the central banks, by the governments and by the people.

Technically, on the monthly charts, Gold has fallen below the 24month, 36month moving averages after more than a decade which shows technical weakness. Gold, as per our view, has a target of $850-$900 in the coming years. Ofcourse, this won't be a one sided fall! There will be rallies and strong upmoves but the $1430-$1530 zone will be a strong resistance zone. Gold will lose momentum everytime it moves towards that zone. It could also eventually recover upto $1630 but that will be the top for quite a few years. On the downside, we have seen $1150-1180 range be a strong support. $1100 could be a good support for 2014. This is the expected range of Gold for some months now. $1100-$1500. The FED Tapering won't have a drastic effect on Gold. As per our views, Gold will see consolidation upto 2019 before beginning it's next cycle. In this period it will eventually touch lows of $850-$900 and could see upmoves upto $1630. The actions of central banks, economic data will keep altering the medium term trends in Gold prices but the larger picture remains the same as above. No hedge fund, how much ever they claim to hate Gold or dump Gold will actually have a portfolio without investments in Gold. Unlike the 1999-2011 period when Gold saw new buyers driving it's prices up, the coming few years will see Gold changing hands as the world economy tries to find it's balance between inflation in emerging markets and slowdown in developed markets and thus consolidate and stay range bound. The demand for Gold is at all time highs in India and China and these 2 nations with a major chunk of the world's population are known to be the biggest lovers of Gold and the thirst for it only grows bigger by the day.

Why are we not extremely bullish on Gold?
Well, 2 years+ into the correction, Gold hasn't really formed a bottom, it has not given signs of consolidation yet and we expect it in the coming 5 years.

Why are we not extremely bearish on Gold?
Already down close to 40% from it's top, we don't see it extending losses to more than 70% which is usually a major correction level seen in all asset classes.

Can we go wrong?
Ofcourse, Gold won't consider our analysis for it's movements.

How to invest in Gold?
Reduce the gold in your portfolio if you have been holding it since years. For those who plan to invest, SIP is the best route to enter it for a very long term view. Keep adding regularly.

Shall I completely remove Gold from my portfolio?
No, our view is to always have some funds parked in Gold. 
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