Subscribe to Money Morning get daily headlines subscribe now! Money Morning Private Briefing today's private briefing Access Your Profit Alerts

A Forecast for Gold in 2014

A Forecast for Gold
Gold in 2014: Gold prices touched the $2,000 mark in the year 2011. However, since then, there has been a drastic consolidation of the yellow metal.

In 2013, gold bugs saw the gold price dropping 24% against the U.S. dollar. It was the third-worst decline in the history of gold since the year 1975.

But gold in 2014 is back.

"Gold has rebounded from late December into mid-March, tacking on about $200 an ounce, or nearly 17%," Money Morning Resource Specialist Peter Krauth said.  

Note:The Fed's 2014 taper means volatility ahead. So we've outlined how to find profits in a volatile market – like triple-digit gains in just days – if you start with this strategy…

Here's a look at gold's historical run…

Gold's Historical Run

Gold has been a tempting investment option since 2005, when it gave the highest return of 31%. Over the next three years, gold held its ground and gave a smart return of 9%, 29%, and 43% percent, respectively.

In fact, up until 2011, gold had given a very good return to investors. Dating all the way back to 1973, gold has fetched an average return of 11%. It was only in 2013 the yellow metal took a drastic hit. With the stock market surging, the safe haven metal inevitably took a value hit.  

So where is gold going next?

Bullish Factors for Gold in 2014

China's economic growth and interest in gold is expected to continue to drive gold in 2014.

Since 2001, China's money supply has grown, with a compound annual growth rate (CAGR) of 19.4% CAGR. China's CAGR is three times the expansion of the U.S. dollar. Not surprisingly, the renminbi – the official currency of China – price of gold has enjoyed a CAGR of 16.9% in this period, reflecting that the renminbi price of gold is directly proportional to China's money supply.

Chinese citizens are pouring some of their growing wealth into gold.

"Buying in that area has been exceedingly strong, with China's consumers buying up 41%, setting a new record of 1,065.8 tons and beating out perennial leader India at 974.8 tons," Krauth commented.

Even the Chinese government itself is contributing to gold price growth in 2014 – it seems to be unquenchably snapping up the precious metal.

"China's central bank is thought to have loaded up since it last reported its official gold holdings in 2009 at 1,054 tons. I believe China's central bank has probably accumulated about 4,000 tons by now. But we'll have to wait for their next official announcement, which could come soon, to know for sure."

Gold in 2014 also stands to be boosted by recent developments in India.  

The former number one gold-consuming nation is currently not taking part in the global trade market because of importation restrictions to its trade deficit.  This is being done to strengthen the rupee, India's currency.

But with a recent major election in the country, any changes to the import policies will increase gold consumption there – and boost gold prices globally.

Finally, investor sentiment plays into how gold in 2014 will perform. Even though the precious metal suffered last year, sentiment has been positive of late.

"To a large extent, I think the bears were exhausted, and most (if not all) sellers had finally sold," Krauth said. "So, gold was coming off a technical low and sentiment extreme around the $1,190 price range."

Gold prices per ounce reached $1,300 on Tuesday, ending the session at their highest level in two weeks. June gold finished the day up $10.60 at $1,308.90 an ounce. Spot gold ended the session on a favorable note as well, up $12 at $1,309.50.

Next: We found a digital payments stock that could surge 50% in just two years. And it's the best play in a trillion-dollar market.

Join the conversation. Click here to jump to comments…

Leave a Reply

Your email address will not be published. Required fields are marked *

Some HTML is OK