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Gold's Forecast for 2014

In: Business and Management

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In the past, precious metals were as important as currency but now they are form of investments and industrial commodities. Gold is believed to be a traditional form of safe investment which people would like to purchase and keep for the future generations. Gold is also an asset which countries invest in as part of their sovereign wealth. They hope for its’ value to maintain a steady trend on the upside so as to ensure growth in the investment. 2. GOLD PRICE FORECAST- 31 DECEMBER 2014

No. | Forecast Made (DD/MM/YY) | Organization | Type of Gold | For date: Dec 31 2014 | 1 | 13/09/2013 | Goldman Sachs | 1 Ounce | $1,050 | 2 | 13/09/2013 | HSBC | 1 Ounce | $1,435 | 3 | 20/12/2013 | ANZ Bank | 1 Ounce | $1,450 | 4 | 02/10/2013 | Fitch | 1 Ounce | $1,200 | 5 | 11/05/2013 | Deutsche Bank | 1 Ounce | $1,500 | 6 | 06/13/2013 | Société Générale | 1 Ounce | $1,150 | 7 | 09/07/2013 | UOB Kayhian | 1 Ounce | $1,200 | 8 | 09/13/2013 | Thomson Reuters GFMS | 1 Ounce | $1,300 | 9 | 09/23/2013 | Citigroup | 1 Ounce | $1,250 | 10 | 13/12/2013 | J.P Morgan | 1 Ounce | $1,263 | | | | | | | | | | | | | | Mean | $1,280 | | | | Median | $1,257 | | | | Standard Deviation | 143.5709658 | | | | Min | $1,050 | | | | Max | $1,500 |

(Note: Please click on the organization title for their respective sources of information available)

Table 1
The table above shows the various forecasts that have been made by renowned institutions of the gold price per ounce in the year end of 31st December 2014. An ounce is 31.1 gram. Additionally, the average of the mean price is $1280 per ounce. The lowest the gold prices is expected to fall is $1050 per ounce while the highest price is expected to be $1500. The standard deviation of gold is approximately $144 which is quite high. This shows that the predictions of the various organizations expectations do not go in the same direction. Certain organizations have priced the expected growth rate lower such as Goldman Sachs, Fitch and Societe Generale while some organizations expect the gold price to be higher such as Deutsche Bank, ANZ Bank and HSBC. 3. OUR EXPECTATIONS AND THEIR REAsONS
Our group feels that by the end of 2014, we would probably see the prices of gold on an inclination. This is due to four main reasons; A) Traditional Culture of the Chinese and Indian Buying the Gold

It would not be wrong to say that the Chinese and the Indian make up almost half of the market for the gold purchasing. In reality, China has overtaken India to become the top gold consumer in the world. Today, some people measure your wealth status according to the amount of your gold invested whether be it physical gold or in certificates. India accounts for 25% of the global gold demand. Traditionally, many Indian weddings do have the custom of wearing and giving gold away with their daughters. Also, China accounted for approximately 28% of the gold usage. These two nations are the one of the world’s largest economies. They have displayed immense interest in the purchasing of gold. However, many well established firms believe that the price would not rise as high which is stated in their forecast of the gold pricing for the year end (Eg: Goldman Sachs). Nevertheless, it would be no surprise as to the price of gold rising by year-end 31 December 2014 as there is positive expected growth of demand for it.

B) Rising Real Income

As there is a difference between the income gaps of the poor and the affluent, people who can afford gold will purchase more of it and keep it for themselves for the future usage and increasing their asset counting.
In 2013, figures released by the National Bureau of Statistic show that the disposable income of urban residents increased by 9.6 percent after adjusting for inflation. Thus, high level of income would lead to higher level of investment.

C) Future Expectations
In the coming years, gold demand in China will rise by approximately 25% according to the World Gold Council due to the increasing population of the wealthier. Additionally, Indian demographics and future wealth growth serve as one of the biggest drivers of future gold market potential growth. These market motivators will cause the price of gold to be on the incline for the foreseeable future.
Also, inflation has been increasing and causing the future value of money to drop. This would result in more people buying the gold and keeping it as an asset due to its value being non-depreciating.

D) Gold Discovering Trend

Figure 1: Gold Discovering Trend

As seen from the figure above, the trend shows that from the latter part of 2010, estimations of gold mines being discovered seem to be lowering in the coming future. This would result in the supply of gold to decrease and in turn cause the price of gold to rise in the future. 4. CONCLUSION
There appears to be a difference in opinion between the various institutions as to how the gold price will unfold itself in the near end of this year. However, there also seems to be continued demand which assures that the price will pick up. Therefore, this shows that even though there has been a dip in the prices of gold currently, our group believes that there will be a rise in the price of gold per ounce in by the year end of 31st December 2014.…...

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