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Gold will fall below $1,000 in five years, says Credit Suisse

TradingPub Admin | May 17, 2013

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Want some commodities trading education containing key gold predictions made by market experts? Then consider the following information:

Sharply bearish gold forecast
One estimate that is worth noting was made recently by Ric Deverell, head of commodities research at Credit Suisse AG, who has predicted that the precious metal will fall to $1,100 per ounce one year from now, and to less than $1,000 an ounce five years from now, according to Bloomberg News.

He noted his sharply bearish position, telling reporters in London that "gold is going to get crushed," Bloomberg reports. "The need to buy gold for wealth preservation fell down and the probability of inflation on a one- to three-year horizon is significantly diminished."

Last month, the commodity fell into a bear market, falling 20 percent from its high set in 2011. Before experiencing sharp drops in 2013, the metal notched 12 straight years of gains.

Additional market predictions
Deverell is not the only market expert providing dire sentiment for the precious metal, as Deutsche Bank AG has predicted that the metal could drop to as low as $1,050 per ounce in 12 months, and Goldman Sachs Group Inc. predicted on April 23 that it will drop to $1,390 an ounce, according to Bloomberg News. Also, a poll of investors conducted by Credit Suisse in London on May 15 projected that gold will be worth less than $1,400 per ounce in 2014.

Prior rush to gold
Many market experts have fled to gold as a safe-haven asset amid widespread economic uncertainty, and in addition, data provided by the International Monetary Fund reveals that the amount of gold held by the world's central banks has risen to its highest level in eight years, Bloomberg reports.

The World Gold Council estimates that these financial institutions purchased 534.6 metric tons of the metal in 2012, and might buy even buy even more this year, picking up 550 metric tons, according to the news source.

New normal
Now, many believe that the situation has changed, and after the sharp depreciation the metal has experienced recently, some market experts have declared that it is no longer the safe haven it once was, Bloomberg News reports.

Credit Suisse wrote in a report released on January 3 that gold is a "wounded bull," according to the media outlet. He said that in the near term, the price of the metal could fall to as little as $1,350 per ounce in the next few weeks.

Central bank challenges
"When gold is going up, it looks like a great idea to buy more gold," Deverell stated, Bloomberg reports.

He added that many central banks are purchasing the precious metal in order to diversify their existing reserves, but in the event that the commodity has a period of sustained price declines, the officials of these financial institutions will not be happy with the loss of principal that would result, according to the news source.

"And when it's going down, do you really think risk-averse central bankers are going to try and catch the knife? No."

'Bargain-buying'
Deverell referred to the recent surge orders for physical gold items such as jewelry, bars and coins that happened after the metal's price fell to a two-year low as being simply "bargain-buying," according to Bloomberg News.

A robust pickup in demand has been observed in multiple regions, as India's imports of gold bullion could surge 47 percent in the second quarter, according to the All India Gems & Jewellery Trade Federation, while the U.S. mint announced on April 23 that it had sold out of its smallest gold coins, the media outlet reports.

The market expert simply likened this strong increase in purchases of the precious metal as being like "cash for clunkers," saying that it only represents a short-term stimulus.

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