Our gold forecast for the rest of 2015 shows three big factors affecting the direction of the yellow metal.
First, let's look at where gold prices are now. After hitting a four-week high Thursday, the gold price paused in early trading Friday. At last check, the yellow metal was up $0.80 at $1,202.80 an ounce.
After trading as high as $1,207.00 an ounce, gold ended Thursday's U.S. session up $24.50, or 2.08%, at $1,201.40.
Thursday's gain in the gold price put the precious metal back in positive territory for the year. The yellow metal is up 1.5% year to date.
So, what's the longer-term gold forecast?
There are a few factors affecting the rest of the year's gold price forecast. Let's take a look...
2015 Gold Forecast Factors
One thing that will give gold prices a boost is investor flight to safety, thanks to Greece.
Investors are bulking up on safe-haven gold to guard their wealth against the possibility of a Greek debt default. They also think an ensuing exit from the currency union will destabilize the euro. Gold is widely recognized as an alternative currency. It's also used as a reserve asset by the globe's largest central banks.
And central banks have loved gold lately - another reason we're bullish.
"Central banks have remained conspicuous net buyers (of gold), with the current trend now stretching into 17 consecutive quarters," Money Morning Resource Specialist Peter Krauth notes. "Russia was the standout, adding more than 30 tons in Q1."
Greece met with creditors Thursday. But bailout negotiations are not going well, and the clock is ticking. Eurozone officials said they need significant concessions from Athens to move forward.
"Time is running out as the current aid program for Greece runs out at the end of the month," Commerzbank analysts wrote in a note to clients. "Without further financial aid, there is a real risk of national bankruptcy."
International Monetary Fund chief Christine Lagarde said Thursday Greece would be in default at the start of July if it fails to make a repayment on June 30. There is no grace period or possibility to delay.
A European Central Bank Official warned Thursday that Greek banks might not be able to open Monday. Reuters reported that 2 billion euros ($2.3 billion) were yanked from Greek banks between Monday and Wednesday. CNBC said another billion euros were withdrawn Thursday. Eurozone officials will hold an emergency summit (a crisis meeting) Monday.
Further supporting a bullish gold forecast are Asia's markets.
Worries are escalating that China's booming stock markets are in a bubble. The Shanghai Composite shed 3.57% Thursday.
China's stock market has skyrocketed to blistering new highs this year. The benchmark Shanghai Composite is up nearly 60% since Jan. 1. The Shenzhen Composite has surged some 120%. That handily makes it the world's best-performing market of 2015.
And the bubble talk isn't just in China...
There are concerns over U.S. markets - partly stemming from the Federal Reserve's policy change.
You see, the Fed's quantitative easing (QE) has also put so much downward pressure on interest rates that interest-bearing debt investments have become unattractive. In a search for yield, the economy has rebalanced its portfolio toward other assets as well.
This has all come together to fuel a bull market in equities that's been going on for six years.
And this is where gold becomes attractive.
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If this bull market does prove to be a bubble, a good allocation of gold can protect some of your capital. Gold can help to provide some upside if there is downside in equities.
"I am not suggesting that you invest exclusively in gold," Money Morning Chief Investment Strategist Keith Fitz-Gerald said. "Stocks have clearly outperformed gold over the last 125 years. But I am suggesting you buy it as part of an intelligently planned investment strategy."
Fitz-Gerald added, "Gold has been proven to be a great crisis hedge and one that is more perfectly correlated to interest rates, which are, in turn, driven by inflationary pressures and global risk."
How to invest in gold now: Get our gold investing cheat sheet
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- Wall Street Journal: Gold Hits Two-Week High on Fed Reinsurance, Greek Worries