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Investors are no doubt ready to see gold make some significant gains. But can the yellow metal break through $1,400 by the end of the year?
Still, 2014 is not over, and that means there is still hope that gold will recover before the year is out. That’s especially true as the fall season sets in and investors return to the market.
One person who believes gold is due for a spike in price is Scott Carter, CEO of Lear Capital. In a recent call, he told Gold Investing News, “I’ve been holding firm. We’re going to see gold hit $1,450 before the end of the year.”
While some investors might shake their heads in disagreement, Carter pointed out that for the last quarter, gold has for the most part been relatively stable, trading in a narrow range of about $1,280 to $1,320 per ounce. And though those prices aren’t too impressive, Carter highlighted that the yellow metal is up about 8 or 9 percent, making it the best performing asset class in 2014.
So why will gold make a move even higher?
The answer involves a simple — yet uncomfortable — truth that no one wants to hear: the US economy isn’t doing that great.
Despite Q2 GDP numbers coming in at 4 percent, Carter expects that figure to be revised significantly. “As soon as you read that half the growth was from inventory build up and not from actual sales,” Carter explained, “you know that the revisions for Q2 GDP growth 30 days and 60 days will take that 4 percent and knock it down to about 2.5 percent.”
Further to that, Carter is of the opinion that “the US economy will be lucky to get to 1.5- or 2-percent growth for the whole year.” So if there is in fact a revision in the future, Q2 GDP numbers will ultimately show that economic growth just isn’t there.
Carter predicts that some time in the late third quarter or early fourth quarter, investors will see “fear enter the market, because of earnings growth — or lack of economic growth. We’re going to see signals that the economy is not going nearly as fast as we want to believe it is. And when that happens, you’re going to see a correction in the markets.”
With history showing that big market moves tend to happen in equity markets around October, it will be interesting to see how those markets perform later this year. As investors know, September is typically a strong time for gold, and as Carter said, “any weakness in the equity markets will only add to that.” As a result, if there is going to be any big price movement, we can expect to see it before things slow back down again towards the end of the year.
Do you think gold can make the $100 jump to $1,400?
Securities Disclosure: I, Vivien Diniz, hold no direct investment interest in any company mentioned in this article.