LONDON – We have seldom seen so many negative price forecasts for gold coming out of the bank analysts as we have over the past week or so. The latest from UBS anticipates a 13% drop in its one-month forecast. This followed close on some very negative forecasts from numerous other bank analysts showing undoubtedly something of a herd instinct as they try to outdo each other in pessimistic predictions for the yellow metal. Does this represent the turning point so beloved of contrarians?

Certainly the gold price seems to have received something of a shot in the arm over the past couple of days regardless of analyst predictions. Some of these had been calling for $1,050/oz or lower – in some cases much lower! Thus, ever since the onset of all this negative analysis, gold has done something strange. Firstly it steadied and now has risen quite sharply, moving back above the key $1,100/oz level, although whether this can be maintained remains to be seen.

Those responsible for the big gold bear raids that knocked the price down hard a couple of weeks ago might be stimulated into action again. There has been a massive increase in short positions being taken on COMEX, and there is now something of a rush to cover these and go long which could drive the price far higher still.

The lower prices have already seen huge demand for physical gold from around the world. According to, COMEX registered physical gold inventories hit such a low that they had to be ‘rescued’ from potential default by JP Morgan which reclassified a big tranche (276,000 ounces – or around 8.6 tonnes) of its gold holdings from the Eligible into the Registered category, which makes it readily available for good delivery on the Exchange. (Eligible stocks are stocks which have met COMEX quality checking procedures, but may be being held on behalf of clients, or are just being vaulted securely and may never actually become Registered as available for delivery against COMEX futures contracts.)

Today, China devalued the yuan against the dollar by 1.9% that should have been negative for gold. But after an initial dip back below $1,100/oz level after the London market opened, gold started to strengthen again, and at the time of writing had breached the technically significant $1,115/oz level.

Even so, gold bulls are suddenly tasting blood after a very depressing few weeks, and the bears may be in retreat – but for how long? Whether this signals the long-awaited start of a gold price recovery or is yet another proverbial dead cat bounce is far too soon to tell, but has already regenerated talk of substantial rises ahead.

Elliott Wave analyst Peter Goodburn, who last year predicted a gold price fall to around the $1,100/oz level (see: Gold to fall to $1,100 then skyrocket – silver, platinum in behind) followed by a very strong recovery, will be hoping gold’s latest move vindicates his technical analysis, although if it is indeed happening it’s taking place around a year behind his original forecast.

But gold is also the price driver for the other precious metals and a sharp increase in the gold price could lead to an even sharper potential rise in the platinum group metals (PGM’s). PGM’s have been even more depressed than gold despite decent fundamentals, and particularly so in silver which can be much more volatile than its yellow sibling.