Algorithmic Gold Forecast For 2014

In 2011, gold prices touched $2000. However, since then the precious metal’s value has not fared well, falling 24% in 2013.  Gold fell below $1,300 on Tuesday as the market focused on the U.S. Federal Reserve’s policy meeting and expectations for strong U.S. data although losses were limited due to demand for safe haven assets amidst increasing tensions between Ukraine and Russia, who is accused by the West of leading a separatist revolt in Eastern Ukraine after the country annexed Crimea in March. The Federal Reserve is commencing a two-day policy meeting on Tuesday. It is expected to reduce its monthly bond purchase program for the fourth time in a row and to provide guidance on when it might raise interest rates. Signs of a stronger economy are bearish for gold.

Tensions Over Ukraine

On Sunday April 27th 2014, President Barack Obama stated the United States and Europe must join forces to impose sanctions on Russia to stop it destabilizing Ukraine. Obama told reporters, “We’re going to be in a stronger position to deter Mr. Putin when he sees that the world is unified and the United States and Europe is unified rather than this is just a U.S.-Russian conflict.” The crisis escalated when armed pro-Russian separatists in the eastern city of Slaviansk seized a bus carrying international military observers.  The observers were sent by the Organization for Security and Cooperation (OSCE) in Europe, a 57-nation group including Russia and the U.S. that focuses on conflict prevention and human rights. Last Thursday, Ukrainian forces killed up to five pro-Russia rebels, prompting Moscow to begin army drills near the border.

Reduced Demand In China

Data showed that China’s gold purchases through the main conduit Hong Kong fell to a four-month low in March.  A weaker Yuan and domestic prices below the global benchmark kept banks from importing.  Shanghai prices have recovered to a premium of approximately $1 an ounce but still far below the $20 premiums seen earlier in the year, indicating that demand still remains weak.

The chart below shows the target price in 2014 for the precious metal by different bank and the date of each forecast.  The most bullish target price is $1,413 and the most bearish is $1,050.

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