Leading on the upside is the copper price, which broke out to an all-time high of $4.29 per pound early this morning. The gold price is looking to snap a two-week losing streak that culminated in a 5% correction off its $1,431 record high posted on December 7. The SPDR Gold Trust (GLD), a proxy for the gold price and the largest gold bullion ETF in the world, hovered near unchanged at $135.15.
While most 2011 gold price predictions are skewed to the upside, one noteworthy investor and market pundit see a continuation of gold’s recent struggles in the upcoming year. Doug Kass, founder of Seabreeze Partners and contributing editor to RealMoney Silver, forecasted that the gold price will “plummet” by over $250 per ounce during a four-week period in 2011 and be “among the worst asset classes of the new year.”
Kass also predicted that the price of gold will “experience wild volatility in price (on five to 10 occasions, the price has a daily price change of at least $75), briefly trading under $1,050 an ounce during the year and ending the year between $1,100 and $1,200 an ounce.”
To support his bearish gold price view, Kass cited a recent investor letter from Howard Marks, founder of the multi-billion investment firm, Oaktree Management. Marks compared the yellow metal to a religion due to the polarizing sentiment it creates and the strong beliefs espoused by its supporters. Marks highlighted several challenges of determining the proper level of the gold price, including an inability to gauge its intrinsic value, the fact that it does not produce cash flows, and the infrequency with which it is used for practical purposes.
Kass subsequently presented four factors that could lead to a gold price bear market in 2011. According to Kass, investors may become “increasingly comfortable in a self-sustaining, inflation-free worldwide economic recovery” or interest rates may rise – presenting competition for sterile assets such as gold that do not produce income. Alternatively, equity markets around the world may “surprise to the upside, reducing investors’ interest in real assets (like gold)” or “the U.S. government might (astonishingly) address the deficit.”
In spite of Kass’ bearish gold price outlook, the noted market pundit does not attempt to quantify the likelihood of these four scenarios. He is also not putting his money where his mouth is, as he currently does not have a bearish position in any investment tied to the price of gold. Furthermore, over the years, Kass’ accuracy with these annual predictions has been marginal at best as his outlandish annual forecasts often seem to be proffered in order to generate headlines for himself. To his credit, however, he did correctly call the stock market bottom in March 2009 – a prediction that has rightly earned him widespread praise in the financial community. For the latest updates PRESS CTR + D or visit Stock Market news Today
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