Goldman Sachs predicts a “significant decline” in gold in 2014, following losses of around 26 percent in the previous metal so far this year.
The decline would bring gold down to $1,057 an ounce – prices not seen since early 2010.
Gold suffered a sharp fall this week as better-than-expected U.S. economic data raised the possibility that the Federal Reserve may start scaling back its $85-billion-per-month bond-buying program earlier than anticipated.
According to some market watchers, gold has yet to fully adjust to the reality of tapering, and is vulnerable to further weakness when the central bank finally begins to wind down its monetary stimulus – a major pillar of support that has driven gold to record high near $1,920 in September 2011.
“And then just a couple of days ago, the Fed minutes came out and they said taper is more likely sooner than later. And what happened? Gold fell 3 percent. We’re seeing a very high correlation with that,” Grossman said.
Gold bulls, however, remain unfazed. Victor Thianpiriya, commodities analyst at ANZ, expects the metal to hit $1,450 by end-2014, or 16 percent higher than current levels, driven by robust physical demand from China – the world’s largest jewelry market.
“China has surprised the market on how strong demand has been. There’s also potential for Indian demand to come back,” he said.
Chinese consumer demand totaled 210 metric tons in the third quarter, a rise of 18 percent compared to the same period last year, according to the World Gold council. In India, however, consumption fell 32 percent on year to 148 metric tons, due to government’s crackdown on gold imports.
