Gold prices at crossroads; Analysts sketch divergent views

NEW DELHI (Scrap Monster): Gold investments look bleeding, but are there hopes of recovery in the near future? Analyst community seems to be divided on the issue. A few analysts believe that the recent sharp fall in gold prices present an opportunity to investors to reap the benefits of a massive rally. On the other hand, some foresee further downside to the yellow metal.

The rising strength in dollar value and possible announcement of an interest rate hike by the US Federal Reserve suggests not too bright prospects for the yellow metal going forward. However, Albert Edwards of Societe Generale believes that weakness in yellow metal has presented with the best gold buying opportunity since the 1970’s when gold witnessed a one-way rally from $100 per Oz to as high as $920 per Oz. He notes that gold has managed to more than double between 2009 and 2011 to touch a peak of $1,917.90 per Oz. It has fallen almost 40% from the peak since then. Edwards suggests investors to grab the yellow metal as he foresees a massive rally in the offing.

On the other hand, Rohit Savant, Research Director at CPM Group warns investors from jumping into gold. According to him, gold is likely to see short term rallies, but sustainable gains are unlikely. He further states that the lower levels in gold are likely to stay for next several years. The metal lacks any fresh triggers to take it to higher levels. The prices may appreciate by $100 during the second half of the year. He pegs $1,200 to $1,220 per Oz as the highest level for gold in the coming years.

Meantime, Claude Erb, former commodities trader at TCW Group predicts dramatically lower prices for gold. According to him, gold may fall to levels of $350 per Oz, levels unseen for over a decade’s time. He further notes that gold looks highly expensive at current levels. Gold’s fair value is around $825 per Oz. However, it could witness sharp plunge to $350 per Oz before stabilizing at its fair value.