Although a number of different metals have experienced price drops recently, one metal that bucks the trend is gold.

Although gold prices are just a fraction of what they were five years ago, in recent months gold has been experiencing an uptick – since the start of 2016, in fact. On the 2nd January, gold was selling at 1,063.22 USD to the ounce, whereas on the 13th April 2016 it was at 1,245.26 USD to the ounce. As a safe haven commodity, traders tend to find gold particularly attractive in times of financial upheaval, and with plenty such upheaval recently, it’s relatively unsurprising that gold has seen a significant boost.

As a matter of fact, gold has had quite a remarkable start to the year; the first quarter of 2016 was the strongest quarter for the precious metal in three decades. However, the tail end of last week saw the gold price decline in the face of a strengthening USD.

 

Gold: Gloomy Prognosis from Goldman

 

The jitters at the end of last week have raised the question of whether gold will maintain the level of growth that it saw in the first quarter.

If you look at what the commodities teams at some of the high-level banks are saying, the outlook appears bleak. The commodities group at Goldman Sachs, for example, has been forecasting a gloomy prognosis for the precious metal for quite a few months now. According to the folks at Goldman, the recent panic attacks suffered by the financial markets were an overreaction – and that the market will realise that in due course. They paint a picture whereby oil prices have already seen their bottom, the effect of the Chinese slowdown is limited and the US steers far away from recession. In this scenario, as the market strengthens, gold would be sold off, dropping in value. Indeed, Goldman has forecast that gold will drop back below the $1,000 mark sometime within the next year.

 

Schiff Predicts a Burgeoning Gold Price

Others think differently. Financial analyst Peter Schiff, for example, made headlines yesterday when he called out Goldman Sachs on this issue. Schiff believes that Goldman are basing their gloomy predictions around a belief that the Federal Reserve will raise interest rates a couple of times this year, and that the US is firmly back on track and on the road to financial recovery. According to Schiff, the financial recovery is little more than an illusion, something which will soon become clear. If that’s the case, then it would be incredibly unlikely that Federal Reserve would raise interest rates again. Without interest rate rises, there’d be no strengthening of USD on the back of such rises, and people would keep flocking to gold. Indeed, Schiff goes as far as to say that gold will (eventually) reach $5,000 an ounce, although given that even at its highest point in the last 20 years gold wasn’t worth even two fifths of that amount, investors certainly aren’t holding their breath over that prediction. Nonetheless, it is interesting to contrast these diametrically opposed predictions regarding gold’s future direction.

The months ahead should provide us with some answers, both regarding the markets in general and gold prices in particular. Goldman predicts stronger financial markets and a weaker gold price. Schiff (and a number of other analysts) forecast a market slump and a subsequent strengthening for gold. In the coming months we’ll be able to see which (if either) of these sets of predictions are broadly correct.