“If you are long gold you better hope for bad economic news,” said Michael Shaoul, the chairman of New York-based Marketfield Asset Management, which oversees about $4.5 billion of assets. “We have had a good six months of economic data in U.S. and Europe is surprising people with how quickly it is healing itself. The long-term rally is under more pressure.”
Analysts are less bullish than last year. Morgan Stanley cut its forecast for this year to $1,853, from $2,175 in May, and Deutsche Bank AG and BNP Paribas SA reduced their 2013 outlook by at least 12% since last year, data compiled by Bloomberg show.
JPMorgan Chase & Co. ended a recommendation to hold gold on Jan. 4, saying it may advise investors to buy again once prices decline to $1,550. While Goldman Sachs Group Inc. is still forecasting a 2014 average of $1,750, or 4.1% more than now, the bank reiterated in a report Jan. 13 that prices probably will peak this year.
Hedge funds are also paring wagers on a rally, cutting bets by 54% since October. They held a net-long position of 92,115 contracts in the week to Jan. 8, the lowest since August, U.S. Commodity Futures Trading Commission data show.
“Gold’s still going to have a very solid role as a diversifier in portfolios,” said Kendall of Credit Suisse. “It’s the more shorter-term speculative investors who are going to gradually drift away from gold.”
Bullion failed to set a new record last year for the first time since 2007, rising to within 6.5% of the all-time high of $1,921.15 reached in September 2011. It’s also yet to exceed previous all-time highs when adjusted for inflation, with its 1980 peak of $850 equal to $2,398 today, data compiled by the Fed Bank of Minneapolis show. The size of the futures market, based on contracts outstanding, contracted about 32 percent since November 2010, Comex data show.