Investors are likely to recollect 2013 not only as a banner year for the stocks-but also as a miserable one for gold. With a nearly 30% slide, the gold not only suffered its
first year loss since 2000, but its bottom period since 1981. Yet few strategists are contending that the secular bull industry for gold remains intact. And in fact, for those who stay wary about the Federal Reserve’s quantitative easing announcement looks far preferable to stocks for 2014.
In gold, we’ve lately seen “more of a cyclical rather than a secular bear industry,” said Peter Boockvar on Tuesday’s “Futures Now.” “It’s been up 12 years in a row-it sure was due for a big pullback.” The outlook for incoming year will depend on the Fed, the chief industry analyst at Lindsey Group went on to converse. “The gold business from here could be a challenge of establishment in the Fed or no faith in the Fed,” Boockvar said. “Right now, belief in the Fed is rattling high, as evidenced by the grow in stocks. But I don’t have faith in the Fed.”
In December, the Fed began to taper behind its quantitative easing program, by reducing its monthly asset purchases from $85 billion to $75 billion. The stock industry actually rallied on the broadcast, but gold capped an already intense year by dropping another $30 since that announcement. Yet to those equal Boockvar, who believe the Fed cannot unwind the program without stoking inflation, that drop actually provides a purchasing possibility. “I don’t believe the Fed can pull this off. I believe the exit is going to be extremely messy. Therefore, in my opinion, gold is a area to hide throughout that quote-unquote ‘messiness,’ ” Boockvar said. Meanwhile, Boockvar says that QE has been a “crutch” for stocks, adding that “the big crutch in 2013 potentially is not going to be there in 2014.”
When looking to catalysts that could force gold higher, few traders add that the metal has embellish so beaten down, it could now be a agreement. “In 2011, gold had this $400 range on the side, and as soon as it broke $1,525, that became an inflection direction,” said Brian Stutland of the Stutland Volatility Group. “So I’d expect another $400 decrease beneath that point-that would take us to $1,125. We’re not too much off there, so the depression is likely close.” “If you look at the gold miners themselves, we’re getting to the point where it’s not really profitable to mine gold,” said Anthony Grisanti of GRZ Energy. “So if you see few of those mines slow down or closed down, it could create a small bit of a strain or a slight bit of a contraction in the physical supply, and that could track to higher prices.”
Still, both Stutland and Grisanti were fast to add that as long as strong economic data continue to fall cats and dogs on the gold industry, they don’t have much conviction in any bullish thesis. “I’m kind of just throwing straws in the wind right now,” Grisanti admitted. “I don’t know what’s going to take us higher at this point. It still looks lower to me.”