Goldman Sachs Group Inc.’s Jeffrey Currie says the worst is yet to come for gold and that prices could fall below $1,000 an ounce for the first time since 2009.
“With the more positive outlook on the dollar, and with debasement risk starting to fade, the demand to use gold as a diversifying asset against the U.S. dollar becomes less and less important,” said Currie, who told investors to sell in 2013 before the metal’s biggest collapse in three decades.
Prices this week slumped to the lowest since 2010. The rout is deepening amid mounting speculation that U.S. interest rates will climb this year, curbing the appeal of bullion because it doesn’t pay interest like competing assets. At the same time, China bought less of the metal than analysts were expecting, and the dollar keeps getting stronger.
Currie isn’t alone in predicting more declines. ABN Amro Bank NV’s Georgette Boele and Robin Bhar of Societe Generale AG say bullion will approach $1,000 by December. Money managers are holding the smallest net-bullish bet on gold since the U.S. government data begins in 2006. The metal has led a retreat among raw materials, as the Bloomberg Commodity Index this week fell to a 13-year low.
“The risks are clearly skewed to the downside in this environment,” Currie, Goldman’s New York-based head of commodities research, said in a telephone interview on Tuesday. “There is a probability that the market trades below $1,000 this year given our broader commodity view.”
Gold futures retreated for a 10th day in the longest run of losses since 1996. Bullion for August delivery lost 1 percent to $1,092.50 by 6:59 a.m. on the Comex in New York.
More than $4.4 billion has been erased from the value of exchange-traded products backed by gold since June 30. Holdings are the smallest since 2009, data compiled by Bloomberg show.
“In longer term, we definitely like playing this market on the short side,” Currie said. “We think we are in a structural bear market, not only in gold, but across the commodity complex, as the individual commodity stories are reinforcing to one another, creating a negative feedback loop.”
For more, read this QuickTake: The Rise and Fall of Gold