How low will gold go? Commodities analysts at Societe Generale recently predicted the precious metal could sink as low as $1,200 an ounce now that the gold bubble has burst.
The analysts wrote that there has been a “paradigm shift” in investors’ attitudes toward gold after its dramatic drops earlier this year, news outlets, including the International Business Times, reported.
“We believe that the dramatic price drop in mid-April was the beginning of the deflation of a bubble,” the analysts wrote, according to the news report. “The gold price rally in the late 1970s turned out to be a bubble. We think this time is not much different.”
“We believe that the dramatic gold sell-off in April, combined with the prospect of the Fed starting to taper its QE programme before year-end, has resulted in a paradigm shift in many investors’ attitude towards gold, which is likely to result in continued large-scale gold ETF selling this year and next,” the analysts said, according to the Wall Street Journal blog MarketWatch. “ETF gold selling has averaged about 100 tonnes per month since the April sell-off.”
At press time, the metal was currently trading at $1,367.
The Societe Generale analysts are not the first to offer this prediction. In May, Michael Widmer, metals strategist at Bank of America Merrill Lynch, predicted it might drop to $1,200 an ounce. And NYU professor Nouriel Robini has written that the metal could hit $1,000 by 2015.
The World Gold Council, however, has said that it feels the market’s fundamentals remain strong, noting increased jewelry demand in China and India.