Analysts polled on Nov. 15 provided highly bullish predictions for gold at a time when markets were impacted by speculation that Federal Reserve chief nominee Janet Yellen would contribute to sustained use of quantitative easing.
This information could prove valuable to those who want to make money by trading the precious metal.
Recent poll: Many analysts bullish about gold
In a recent Bloomberg poll that involved 18 market experts, the portion of respondents who predicted that gold would appreciate during the following week was the highest since Oct. 4. They made this prediction at a time when the precious metal was down 23 percent for the year at less than $1,300 per ounce. Comparatively, the commodity reached its peak in 2011, at a level of more than $1,900.
The precious metal has had a rough year, as it fell into a bear market in April. Gold then continued its decline for the next few months, falling to a recent low in June when it dropped below $1,200 per ounce. After declining to that level, the commodity managed to enjoy some appreciation, entering a bull market once again in August.
Paulson maintains stake in GLD
Amid this turmoil, there are certainly those who are optimistic about what the future holds for the precious metal. One individual who is a well-known supporter of gold is billionaire John Paulson, according to Bloomberg.
Data provided in a government filing indicated that during the third quarter, his fund, Paulson & Co., did not change its stake in the SPDR Gold Trust, the media outlet reported. This is the largest exchange-traded product for the precious metal, and Paulson & Co. is the single largest stakeholder in the trust, which trades under the ticker symbol GLD.
Individuals who want to make money by trading gold might benefit from knowing about this information. The precious metal could be undervalued currently, and could therefore provide global market participants with the potential to enjoy significant upside. While gold has traditionally been thought of as a safe haven asset, many market experts have stated over the last several months that they have lost their faith in the precious metal as a store of value.
A perfect example of the developments that could potentially result in the commodity being undervalued currently is the latest data provided by industry organization the World Gold Council, which indicates that in the most recent quarter, global demand for bullion plunged 21 percent, according to the media outlet.
It is also important for those who want to make money by trading the metal to know that it is currently on track to record its first annual loss in more than a decade. The precious metal managed to rise in value every year until this one.
Yellen and QE
One major factor that has been cited repeatedly as having an influence on global asset prices is QE, and the recent statements made by Yellen support the idea that if she is confirmed as Fed chief, she will continue to harness these bond purchases to stimulate lackluster economic growth, according to Bloomberg. During recent testimony she provided to the Senate Banking Committee, she stated that she is not particularly concerned about a bubble existing in securities.
“I don’t see evidence at this point, in major sectors of asset prices, misalignments,” she stated during the hearing, the media outlet reported. “Although there is limited evidence of reach for yield, we don’t see a broad buildup in leverage, where the development of risks that I think at this stage poses a risk to financial stability.”
She emphasized at the event that she would like to address the high unemployment that exists currently by harnessing bond purchases to help accelerate the economic recovery, according to the news source. Yellen made an effort to alleviate the concerns of those who are worried that the value of many different assets have risen to bubble levels.
At the hearing, the vice chair of the Fed stated that both the job market and the U.S. economy are currently in a situation that is “far short of their potential” and that before policymakers consider reducing bond purchases, these key indicators need to be improved, Bloomberg reported. Her statements led Nic Brown, head of commodities research at London-based Natixis SA, to speculate that Ben Bernanke will probably not announce any changes to QE at the next policy meeting.
“It’s unlikely that Bernanke will do anything at his last meeting if he perceives that his successor would prefer to leave policy unchanged,” Brown told the news source. “The dollar may drop back, too. This is all potentially positive for gold prices in the very short term.”
These combined variables, which will likely contribute to the precious metal appreciating, could be very beneficial to those who want to make money by trading gold.
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