Gold Needs to Fall Another 30 Percent to Reach Fair Value, Says Deutsche Bank

The Financial Review reported that the Deutsche Bank believes gold may need to fall another 30 percent to reach fair value, noting cheap oil as its only potential lifeline.
As quoted in the market news:

Gold is currently trading around US$1,096, just above last week’s fresh five-year low of US$1,072.30. But Deutsche’s paper Estimating fair value for gold argues the price of the precious metal needs to drop substantially to bring valuation levels back towards historical averages.
“Gold would need to fall towards US$750 per ounce to bring prices in real terms back towards long-run historical averages,” said Deutsche.
Deutsche ran the gold price through  several models to determine “fair value” for the precious metal.
The Deutsche “gold price model”, which factors in world growth, the US dollar, money supply and central bank gold purchases, calculated fair value at $US785 per ounce.
But the long-run average price in real terms – using the Consumer Price Index – was $US770.  Using the Producer Price Index, the long-run average price was $US725.

Click here to read the full The Financial Review report.