What next for gold?

The recent slump in the price of gold to less than $1,200 per ounce – which regrettably we failed to predict – has prompted us to take a more cautious view of the prospects for the precious metal. Indeed, there is little on the immediate horizon to prevent further declines. Nonetheless, our revised forecasts assume a bit of a bounce in the second half of the year and a slow grind higher thereafter, in line with growth in nominal incomes. After all, it is hard to see sentiment getting much worse than it is now. There are also still some plausible scenarios that could lead to explosive gains in the next few years, maintaining gold’s appeal as insurance against “tail events”.