Analysts say gold could get even uglier

The metal isn't so precious anymore, with Bank of America Merrill Lynch slashing its forecast by 11%.

By MSN Money Partner Jan 9, 2014 2:30PM
Image: Gold Bars (© Stockbyte/SuperStock)By Barbara Kollmeyer, MarketWatch

In one of the first, if not the first, calls on gold this year, Bank of America Merrill Lynch slashed its average 2014 forecast for the shiny stuff by 11% to $1,150 an ounce on Thursday, with a warning it could get even uglier.


Gold plunged 28% in 2013 to just above $1,200, snapping a 12-year annual winning streak and recording its worst annual performance in nearly three decades. 


Silver, which also didn’t escape the chop from Bank of America Merrill Lynch, suffered a 36% loss in 2013, its worst since at least the early 1980s. The investment bank cut its forecast for silver by 21% to $18.38 an ounce.


On Nov. 26, the bank forecast gold for 2014 at $1,294 an ounce, and silver at $26.38 an ounce. (Check out some other calls that MarketWatch rounded up at the year end.)


Strategist Michael Widmer said his biggest gold worry is a lack of buyer interest, as investors have been a marginal driver of prices in recent years. A gain of around 2% so far this year hasn't really convinced him either.


"If investors stopped selling gold, prices could stabilize around $1,200/oz. Yet, this is not our base case and a more likely scenario is for investors to continue reducing their exposure. Our model suggest that this could take prices down to $1,000/oz."

He adds that not even traditional buying of physical gold in India and China will be enough to keep prices from falling. 


Of course, this Merrill call perhaps pales in comparison to blogger Robert Bonomo, who predicted gold will break below $960 an ounce, blaming the likes of MarketWatch and a few others. (h/t Need to Know.)


But gold bugs can cheer up somewhat, as all is not uber-gloomy at BofA Merrill.


Widmer says prices for gold could bottom out later this year. He reasons that a continued acceleration in the U.S. economy, tightening labor market and slowly rising inflation could trigger gold market players to increasingly adjust low inflation expectations, pricing in some unexpected inflation and luring back buyers.


The bottom line: Investors could see some "interesting entry points" for gold this year, he says.


Still from the "gold is pretty doomed camp," Wednesday's fairly hawkish set of minutes from the Fed's December taper meeting was hardly a boon for gold, says Daily FX's Ilya Spivak. Watch out, he says, for Thursday's report on weekly jobless claims to drop to the lowest in five weeks (which it did), boosting the dollar and further eroding that anti-fiat demand for gold. Bigger jobs data lay in wait on Friday.


More from MarketWatch



63Comments
Jan 9, 2014 3:33PM
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wait till the 17 trillion federal debt crashes the economy.
Jan 9, 2014 3:15PM
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it would be nice to see all those BUY YOUR GOLD stores close up
Jan 9, 2014 3:39PM
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Who needs gold when we have Obama Dollars?
Jan 9, 2014 3:26PM
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A couple of years ago a guy named "bobster" kept posting here that he was 100% in gold, that equities/bonds sucked, and the rest of us should sell any stocks or bonds that we had and put everything in gold like he did, and if we didn't listen to him, then we were all morons........I haven't seen a post from bobster in quite a while.   I mentioned this to explain a post I have frequently made in the past:  There are no experts, only those who think they are.

Jan 9, 2014 3:34PM
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It is important to note that these prices are the paper certificate prices for gold and silver.  Good luck finding gold or silver bullion on eBay or at any retail store for the prices listed as the spot price.  The prices are always 5-10% higher for physical gold or silver than the ETF or spot price.   No matter what the CFTC says, there is blatant manipulation in the precious metals market.
Jan 9, 2014 3:15PM
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Golds real value is probably around $450 oz. If it gets there I might buy some. I waited until housing crashed and then bought a house previously valued at $325k for $150k. If the dow index goes to 4000 I might buy that too. Otherwise I wait and party. 
Jan 9, 2014 4:45PM
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If you like your gold, you can keep your gold...oh, wait, just another obama lie.

REMEMBER BENGHAZI 2014 & 2016!!!

Jan 9, 2014 3:30PM
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Where is Bill Fleckenstein? Where is Anthony M.? Where are the Mea Culpas?  Where is the humility? Why can't people admit (at a minimum) that though they may still believe their theories are correct, their market timing has been atrocious?  Why do financial columnists believe that their smugness, their know-it-all aloofness, and their contempt for those who may disagree, is an attribute?
Jan 9, 2014 5:20PM
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The "knocks" on those that own gold are just a laugh. Yes , if you bought the gold at $1900 and sold it now you took a huge loss. Same can be said for those that lost in the stock market a few years back. If you bought the gold and have not sold it.. until you do you have not lost anything. Same can be said if you bought the stocks in 2009 and have made alot of profit but have not sold them.. you have not officially made the money yet. If the stocks take a 20 or 50 % dive before you sell. you have lost too. Did all these banks sell off all their gold when the price was $1900.00 ? I realize some on here think they have the correct theory or answer. Yours is a guess as well as the others. The truth is that we have printed Trillions of fiat paper dollars as well as almost every country. The truth is their has NOT been an INDEPENDANT audit of Fort Knox in over 40 years. The truth is we have delayed until 2017 returning Germany a portion of their gold that we were storing and informed them that to ship it back we needed to remelt it.. aka not send back in the original form that they sent it to us. Yes this makes me a conspiracy theorist for not trusting the federal reserve and our government that their word is true without anyone but themselves auditing them. Gold has been a currency for over 5000 years, fiat money has been running without gold backing it for under 100 years. Massive money printing by the U.S. , Japan , Euro , China ..none of us can truely state what this will lead to. My point is took "make fun" of those that lost money in gold is no more funny than those that lost money in stocks. For those that lost alot of money in stocks.. How would you have felt if the " gold lovers" were coming at you in 2009 ? Different opinions make the world go round... thinking your way is the only smart way... then you live or die by your sword.
Jan 9, 2014 6:42PM
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  If the price of gold goes down that's great news.  That just means I'll be able to buy more before the price skyrockets again for good.

Jan 9, 2014 5:03PM
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And they melted their gold and formed it into that of a calf...............
Jan 9, 2014 9:18PM
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China is buying 3 Moz of gold per month, Physical gold not paper gold from etfs.
Jan 9, 2014 5:57PM
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Time to buy when the majority are selling at a loss.

Jan 9, 2014 4:54PM
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Let's see an ounce of gold will buy you 2.5 ounces of pot in Colorado.  That's a lot better then then the $200 you put in the bank back in March, 2009 that now worth $196. Oh, well analysts are praying that they can create a dumping of gold so  they can load up before China's economy crashes and brings US back down.
Jan 9, 2014 4:47PM
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I wish I bought gold a few years ago. So I could loss 28 per cent. I would of been up 200 per cent after lost 28 per cent from the high price.
Jan 9, 2014 7:30PM
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No one commented about selling gold and using the money to buy silver, platinum or palladium. Quite possibly a better long term strategy. it is worth researching. 
Jan 10, 2014 1:28AM
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  Fat Cat, Not saying gold cant go down a lot more but calling long term gold holders wackos and losers is a little wacko in it self. GLD since May 2005 up 284+%, DOW since May 2005 up 58+%. Just saying. 
Jan 11, 2014 2:01AM
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Republicans reduce their workforce!
Republicans reduce employee wages!
Republicans outsource jobs!
Republicans eliminate pensions and benefits!
Republicans want to eliminate Social Security, Medicare, Medicaid and Snap!
Republicans want to end Unemployment benefits, thus forcing more people on Welfare, which they want to eliminate!
Republicans want to destroy Unions and enforce "Right to Fire" states.
Republicans want Corporate Fascism and an Oligarchy to rule the land!
Republicans worship money and obscene profits above all else!
Republicans want your vote to make all these things a reality!

Is it any wonder why Republicans are losing and becoming extinct?

Mainstream Americans will not allow Republicans to destroy America!

God bless America!
Jan 9, 2014 5:39PM
Jan 9, 2014 5:00PM
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Not seeing any of those commercials for Rosland Capital anymore.  Pump and dump.
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