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The yellow metal sank to its lowest point so far in 2014, touching down at $1,190.30, before reclaiming some of its losses.
Causing all the commotion was more positive data out of the US that showed US employers had added more jobs in September than was expected. The news pushed US unemployment to its lowest rate since July 2008 at 5.9 percent.
Cues of the accelerating US economy have investors turning away from gold, despite underlying geopolitical issues- such as sanctions against Russia and a military campaign against Iraq – that would generally push investors towards safe haven investments like gold. With continued improvement in the US labor markets, the stock markets are expecting the Federal Reserve to tighten its policies, ending its stimulus program and increasing interest rates.
With gold’s latest dip, it’s no surprise that a bearish sentiment has started to blanket the market. As RBC analyst Stephen Walker wrote in a research note on Friday morning, the firm isn’t expecting a recovery for the yellow metal anytime soon. “We are lowering our near-term gold and silver price forecasts, due to a combination of US dollar strength, relatively soft physical demand and strength in the broader equity markets. We now assume a broad $1,150 to $1,350 trading range for the next 3 years and maintain our $1,400 long-term gold price forecast.”
RBC’s Walker currently has a $1,285 price target for gold in 2014, which only gets slightly improved for 2015 at $1,300 and at $1,350 for 2016. With that view in mind, the analyst doesn’t believe that gold will reach $1,400 until 2018.
Meanwhile, Adam Klopfenstein, senior market strategist with Archer Financial, echoed the pessimistic sentiment for the yellow metal. “This is just another sign that the metals trade is over,” he told the Australian. “The inevitable trend for gold is lower, and it’s a long drop from here.”