Haigh is not alone. Nouriel Roubini, professor of economics and international business at New York University and known as Dr. Doom for predicting turmoil before the global financial crisis began in 2008, says gold may drop to $1,000 by 2015. Goldman Sachs Group Inc.’s Jeffrey Currie, the New York-based analyst who also predicted bullion’s plunge, has said it may fall below $1,200 temporarily. Societe Generale’s Haigh expects prices to average $1,150 in 2014.
In August, when heightened concerns over the 17-nation euro region’s debt crisis made the economic outlook more uncertain, macroeconomic issues, liquidity and the dollar contributed to about 50% of the moves in gold, Haigh said. Supply and demand, including hedge fund flows, central bank buying and coin sales, accounted for the rest, according to Haigh’s algorithm.
On April 2, the day Societe Generale put out its report on gold, the influence of macroeconomic issues, liquidity and the dollar was down to 24%, said Haigh, who leads analysts in London, Paris and Singapore.
“Around the start of the year, the variables that were important for gold like the dollar and interest rates started to become much, much less important, to the point that they became largely insignificant by around March,” said Haigh, who considers the April call on gold the best of his career. “The fundamentals like central-bank buying and hedge-fund flows really started to change shape around the same time.”
The metal surged 70% as the Federal Reserve bought $2.3 trillion of debt from December 2008 through June 2011, flooding the financial system with cash. Gold tumbled this year amid speculation that improving growth would spur the Fed to taper stimulus. The S&P GSCI gauge of 24 commodities dropped 4.2% this year, on track to outperform gold for the first time since 2009. The MSCI All-Country World Index of equities rose 4.6% while a Bank of America Corp. index shows Treasuries lost 1.9%.
Hedge funds and other large speculators held a record number of short contracts, or bets on lower prices, by May 21, making them the least bullish on gold in more than five years, according to U.S. Commodity Futures Trading Commission data.