Goldman Sachs seems to think 2014 will be the year that gold will go down even further due to one substantial reason: the recovery of the United States economy. How much will it sink? One Goldman expert says $1,050, a 16 percent decline from the present prices of around $1,250.
Speaking in an interview with CNBC on Monday, Jeffrey Currie, head of commodities research at Goldman Sachs, believes the economic recovery will be the major blow to the yellow metal and will continue to be that way for years to come.
"Our view there really is driven by the expectation of the U.S. economy reaching escape velocity," Currie said on the network’s "Squawk on the Street." "Essentially when you think about a short on gold ... it's essentially just a bet on a substantial recovery in the U.S. economy."
Due to last month’s bleak job numbers, gold has been gaining momentum again. Currie conceded that gold is still a terrific hedge against inflation, but he doesn’t see high inflation in the short-term, though he did note that once the economy picks up more steam then there could be inflation, which would be good for gold.
In addition, Currie sees a drop in other commodities, especially in copper and beans. This year will be the year that continues the trend of investors shying away from commodity markets in emerging markets and shift their money into the developed world. Essentially, this would cripple the commodity market.
The primary question that some goldbugs would ask Currie: is there any validity in what he is saying?
The U.S. economy doesn’t appear to be recovering at all. The real unemployment rate is close to 25 percent, one-third of the country receives some sort of social assistance or monthly check from the federal government, companies are cutting back on employment or slashing hours to avoid Obamacare and the U.S. dollar is continuing to be debased.
Furthermore, Currie noted that he doesn’t see inflation. However, another important question: does he shop for his own groceries? It has been widely reported that meat prices are rising and have been for the past few years, while Americans can expect to pay more for housing, healthcare, public transportation and pretty much everything else.
According to Credit Suisse, the commodity market has been performing quite well, including last month when most sectors of the commodity market jumped between two and five percent.
“Amid macroeconomic improvements in the US and abroad, correlations between commodities and traditional asset classes have been decreasing,” said Christopher Burton, Senior Portfolio Manager for the Credit Suisse Total Commodity Return Strategy, in a statement. “We expect individual commodities to continue to be increasingly driven by fundamental factors rather than macroeconomic headlines. While broad macroeconomic trends continue to be important, they will likely impact asset classes in different ways. We continue to expect commodities to provide valuable diversification benefits going forward."
At the time of this writing, gold is trading at $1,252.40, while silver is valued at $20.40.