Gold contrarians say it’s time to start buying «
It’s known as the contrarian approach to investing, and there’s a lot more talk about it after gold’s hefty 28% plunge last year and as analysts slash their forecasts on gold for the year. Investors are selling low and contrarians have an opportunity to buy cheap.
“The analyst landscape is uncommonly bearish,” said Dennis Gartman, editor and publisher of The Gartman Letter. “Even the ‘gold bugs’ are neutral of gold and that is stunning, really.”
His view: it’s “time to be quietly bullish.”.
Last year, gold prices dropped 28% for its worst year since at least 1984, when FactSet began tracking data.
Enlarge Image And taking a look at 2014 average gold-price estimates from six investment banks, a MarketWatch tally shows consensus for a fall of 14.5% from 2013’s average. Deutsche Bank’s estimate is among the lowest at $1,141 an ounce, while HSBC’s is among the highest at $1,292. Deutsche Bank set 2013’s average at $1,413.
Futures prices for February gold /quotes/zigman/9159480/realtime GCG4 +1.07% settled at $1,240.20 an ounce on the Comex division of the New York Mercantile Exchange on Thursday, and some of the 2014 average price forecasts are lower than that.
“There is a nearly unanimous consensus that gold is going to drop to somewhere around $1,000” an ounce,” said Steven Kaplan, chief executive officer of TrueContrarian.com. “Many investors have positioned themselves to benefit from lower gold prices with very few expecting the opposite, implying a lot of short selling” or an avoidance of the sector.
Kaplan is one of the few who expect the opposite to happen. He’s predicting higher prices.
GCG4 1,253.50, +13.30, +1.07%
Since the “financial markets always do whatever rewards the fewest people, a powerful rally in 2014 is therefore extremely likely,” Kaplan said, and almost everyone will be surprised when gold reaches a new, all-time high in late 2014 or early 2015. Gold futures hit a closing record high near $1,900 in August 2011.
DoubleLine CEO Jeff Gundlach also said this week he sees a gold rebound this year .
“I am not negative on gold,” he said during a webcast on his 2014 market outlook late Tuesday. He sees gold going up to at least $1,350 this year and said he’s “on the long side” of the gold miners.
Bucking the trend
Of course, there are many who would argue with a prediction for higher prices, and for lots of good reasons.
Michael Lewis, research analyst at Deutsche Bank, said in a note this week that positive growth shocks in the U.S. are likely to assist the Fed in terminating its QE program by the end of 2014. That would “sustain the adjustment in U.S. real interest rates and encourage a strengthening in the U.S. dollar, both of which will introduce additional downside risks to the gold price.”