15 Experts Provide Insight On The Factors Contributing to a Bull or Bear Market For Gold in 2015
15 Experts Provide Insight On Bull or Bear Market For Gold
Leading financial experts analyze the key factors driving gold markets, from Federal Reserve policy to global economic uncertainty
Introduction
What will happen with the gold price? While gold is widely used to diversify portfolios and provide a hedge against inflationary forces, the burning question for medium-term investment is always, "Which way is the market going?"
This is undoubtedly a tricky question, one that constantly occupies the minds of many well-paid analysts and money managers. The problem with predicting what the gold market will look like is deciding what factors are most important. Rather than provide a single answer about how gold markets will perform, we've reached out to a wide array of personal finance experts and compiled their insights to give you a broad overview of different opinions and expectations.
Instead of relying on one person's view wholesale, we've provided a sampling of expert opinions from across the industry to create a more complete picture of market sentiment. Our respondents gave a variety of different outlooks for the gold market, from bearish responses to bullish responses, and everything in between. For investors monitoring current gold prices, these insights provide valuable context for understanding market dynamics.
Table of Contents
Top 10 factors affecting gold markets
Our expert respondents have offered their own reasoning for their market predictions. In descending order of frequency mentioned, here are the most cited factors affecting gold:
1. Real Interest Rates
Specifically the Federal Reserve raising its key rate - the most frequently cited factor by experts across the spectrum.
2. Central Bank Policies
Generally bearish sentiment on paper money and central bank monetary expansion strategies.
3. Inflation Dynamics
Both inflationary and deflationary pressures creating uncertainty in traditional monetary systems.
4. Geopolitical Instability
Global economic instability and geopolitical strife creating safe haven demand for precious metals.
5. US Dollar Strength
The strength or weakness of the U.S. dollar relative to other major currencies and gold itself.
6. Emerging Market Growth
Economic development in emerging markets, particularly affecting physical demand patterns.
7. European/Japanese Policy
Monetary easing and currency devaluation policies in Europe and Japan affecting global liquidity.
8. Asian Demand
Strong physical demand from China and India continuing to support fundamental market dynamics.
9. Equity Market Performance
The performance of stock markets affecting investor allocation between growth assets and safe havens.
10. Mining Economics
Production costs and mining output changes from falling energy costs affecting supply fundamentals.
Bullish expert perspectives on gold
Physical Market Reality
Several experts emphasized that nearly all physical gold and silver miners pull out of the ground each year is basically already spoken for. The supply has been extremely tight for the last few years, yet paper prices were in a cyclical bear market since 2011 and have not reflected the reality of supply and demand fundamentals.
Technical Analysis Perspective
Jordan Roy-Byrne notes that the bear market in precious metals and mining shares has reached historical limits in both time and price. Gold reached a 21-month high when priced against foreign currencies, showing relative strength even as the US dollar reached multi-year highs.
Currency Wars Impact
Mo Dawoud emphasizes ongoing currency debasement globally, with the EU's quantitative easing program purchasing $70 billion of bonds monthly. This creates high inflation expectations and drives investors toward gold and silver as hedges against bad monetary policies.
Bearish and cautious expert views
Puru Saxena suggests that should the US Dollar continue to appreciate and if inflationary expectations remain contained, precious metals will struggle. However, if the US Dollar reverses course and/or inflation accelerates, then precious metals will benefit significantly.
| Expert | Primary Concern | Market Outlook |
|---|---|---|
| Scott Sumner | Lack of traditional bull market drivers | Not great investment for the year |
| Puru Saxena | Continued dollar strength | Cautious on precious metals |
| David Merkel | Real interest rate forecasting difficulty | Uncertain directional bias |
| Meb Faber | Level of real interest rates | Key determining factor |
Key themes and consensus insights
Central Bank Faith Declining
Mike Shedlock notes that faith in central bankers is waning. When Mario Draghi's "whatever it takes" speech occurred in 2011, it was downhill for gold. But in November 2014, faith in European central bankers came into question, and gold has been firm since.
Mining Cost Structure
Mo Dawoud reports that according to research, gold prices need to be at least $1,400 and silver at $27 for most mines to be profitable. High demand and tight supply means prices will need to increase to reach equilibrium where miners can profit.
Flight to Safety Dynamic
Charles Hugh Smith emphasizes that the US dollar and gold can both rise together during periods of instability. The core reason to buy gold is as a hedge against uncertainty, especially when other asset classes are declining.
Economic Weakness Signals
John Williams suggests watching the U.S. dollar closely. A renewed weakening of the economy will likely raise concerns about Fed policy, which would tend to hit the dollar and spark renewed inflation worries and higher precious metals prices.
Federal Reserve policy implications
Interest Rate Expectations
Multiple experts emphasized that there is a huge presumption the US will hike rates, but growth in the US is not as strong as anticipated. Several analysts believe the Fed will not follow through as aggressively as the market expects, which could be positive for gold.
Rate Hike Reality Check
Experts suggest that while rate hike fears may create short-term pressure on gold prices, the underlying economic fundamentals and global monetary policies remain supportive of precious metals over the medium term. For investors tracking gold price movements, Federal Reserve communications provide key timing insights.
Global economic and geopolitical factors
European Monetary Policy
The European Central Bank's quantitative easing program and potential issues with Greece and the eurozone create uncertainty that historically benefits precious metals as safe haven assets.
Asian Demand Patterns
Strong physical demand continues from China, India, Russia, and other Asian markets. Russia is reportedly putting almost 100% of their monthly trade surplus into physical gold, preparing for the next global financial system.
Energy Cost Impact
Falling energy costs help mining earnings since mining is energy-intensive. This could boost mining output and affect supply dynamics, though demand factors may still dominate price direction.
Supply and demand fundamentals
According to industry experts, primary silver miners make up approximately 25% of the global annual physical silver supply, and only a handful of tiny primary silver miners were making a profit at $16/oz silver. Most primary silver miners were deeply in the red, running mines at huge losses, which is simply not sustainable long-term.
Supply Shock Potential
Several experts warned of potential supply shocks if metal prices remained at 2014 lows. Many primary gold and silver miners were close to shutting down operations, which would create growing shortages for large orders. Unlike subsidized industries, miners eventually must make a profit to remain operational. This creates a natural price floor for both gold and silver markets.
Physical vs. Paper Markets
Multiple experts emphasized the disconnect between paper trading and physical market realities. The paper price was in a cyclical bear market since 2011, but physical demand remained extremely strong from major consuming regions. This divergence suggests that physical market fundamentals may eventually assert themselves in price discovery.
Conclusion
As our expert analysis reveals, the gold market faces a complex array of competing forces. Many experts believe gold entered or will enter a bull market phase, driven by structural factors including record central bank purchases, persistent inflation concerns, geopolitical tensions, and currency debasement policies globally.
The convergence of factors—from Federal Reserve policy uncertainty to ongoing geopolitical crises and tight physical supply conditions—creates a compelling case for gold's role as both a portfolio diversifier and crisis hedge. Several experts noted that sentiment levels reached historically negative extremes, often a contrarian indicator for major market turning points.
Whether analyzing current gold prices or considering silver investments, these expert insights highlight the importance of understanding both technical and fundamental factors driving precious metals markets. The consensus suggests that while short-term volatility may continue, the underlying drivers supporting precious metals remain robust.
For investors, the expert perspectives underscore the value of precious metals as portfolio insurance during periods of monetary uncertainty, geopolitical instability, and currency concerns. Rather than timing markets, many experts advocate for systematic accumulation of physical precious metals as long-term wealth preservation assets.
Disclaimer: This analysis is for educational and informational purposes only and should not be considered investment advice. Precious metals investing involves risks, including potential loss of principal. Past performance does not guarantee future results. Always consult with qualified financial advisors before making investment decisions.