The price of gold is off to its worst annual start in more than a decade as the U.S. economy gathers momentum and traders speculate that the U.S. Federal Reserve will begin to scale back its stimulus.
Several brokerage houses and prominent investors have also turned more bearish, an indication that it may be time to reevaluate your gold holdings, BloombergBlack Investment Strategist Kevin Sullivan writes. Gold has slipped roughly 5 percent year to date and is down 16 percent since setting a record high price of over $1,900 per ounce in September 2011. The price per ounce dropped beneath $1,600 in mid-February for the first time since last September after details released from the Fed’s last meeting revealed that several members had voted to end economic-stimulus programs sooner than expected (the Fed “quantitative easing” has helped push gold prices from $800 in 2008).
This, coupled with better-than-expected U.S. economic data, has led analysts at Goldman Sachs and elsewhere to cut their price forecasts for the metal. Goldman dropped its 2013 forecast to $1,600 from $1,810 an ounce. If that projection proves accurate, it would be the first year in which average gold prices fell from one year to the next since 2001, when gold’s 12-year bull run began. Credit Suisse and HSBC have also lowered their gold-price estimates for this year.
Some analysts argue that if the Fed puts an end to quantitative easing soon, gold might actually enter a bear market. While that’s improbable, gold investors may want to take this as a cue to reevaluate their convictions for holding gold in the first place, Sullivan writes.
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