Gold price 2015: experts divided on whether metal will rise or fall

A top manager at one of the most popular funds focused on gold and gold mining shares says that gold will recover from its three-year slump in 2015, but other investment professionals are less convinced, saying that the price of gold will continue to fall.

Evy Hambro who manages the £1bn Blackrock Gold and General Fund told the Daily Telegraph that he believes that having fallen 40 per cent since summer 2011, the gold price has finally “bottomed-out”, and is about to enter a “new stage”.

Hambro argues that the European Central Bank is expected to print billions of new euros to try to prevent deflation and stimulate growth, which in turn is likely to boost European equity markets.

“In periods of uncertainty people reach out for gold as a safe asset. With this loose monetary policy around the world and fears around deflation, people will want to reach out for safe assets and gold is the natural place that people will move to as a store of wealth,” Hambro said.

HSBC also raised its average gold price forecast for 2015, Bullion Desk notes, due to the growing strength of the dollar and global geopolitical fears which support gold’s “safe-haven qualities”.

But not everyone concurs. Stephen Jones, the chief investment officer at fund manager Kames Capital, says that the main reason people tend to buy gold is fear of inflation, but presently the conditions don’t suggest widespread inflation is a threat.

“In fact, the fragility of the global economy remains such that any upward pressure in the form of interest rate rises – which we do not expect to see until the very end of 2015 at the earliest – could easily push economies into deflation,” Jones said. “This is why any move into gold needs to be based on a very long-term view.”

Some analysts say that attempting to forecast markets is simply impossible. Barry Ritholtz, writing for Bloomberg, says that predictions on markets, interest rates, gold, oil, economic growth and unemployment are a “silly waste of time”.

Ritholtz points to the 2014 prediction by Peter Schiff of EuroPacific Capital last April that the “Federal Reserve’s quantitative-easing program will push gold to $5,000 an ounce”.

Rather than seeing the price of gold skyrocket, it closed 2014 just under $1,200, around 80 per cent lower than Schiff’s forecast. Ritholtz concludes with a quote from economist JK Galbraith: “The only function of economic forecasting is to make astrology look respectable.”