With 2014 nearly at a close, and the price of gold down for the year by 1.7%, what should investors expect heading into 2015? More importantly, is now the time to scoop up shares in the two biggest ASX-listed miners Northern Star Resources Ltd (ASX: NST) and Newcrest Mining Limited (ASX: NCM) while they are still cheap?
The outlook for the gold price in 2015 will be underscored by two key drivers:
1). Volatility; and
2). Inflation
Volatility is largely driven by fluctuations in U.S. markets which have been relatively stable throughout 2014. Equities in particular have been on an incredible run, pushing the Dow Jones Industrial Average up 11.4% in 2014 and keeping investors away from gold.
This stability has given strength to the U.S. dollar which has in turn eased fears of inflation, taking yet more shine off gold.
U.S. consumer price index inflation has averaged just 1.62% over the last five years and it is this lower rate of inflation that French banking group Societe Generale sees continuing to drive down the price of gold going forward.
The bank's head of commodities research Michael Haigh told Bloomberg "we expect gold prices to move toward US$1,000, and the lower oil prices should add even greater conviction to that view."
The view is reiterated by Barnabas Gan, an economist at Oversea-Chinese Banking Corp, who believes gold prices will decline to US$1,000 per ounce or below in 2015, depending on the growth of the U.S. economy.
Goldman Sachs also expects the stronger U.S. dollar to continue into 2015, pushing gold prices down to around US$1,050 an ounce.
At current exchange rates that equates to $1,274 and would mean Newcrest Mining Limited (ASX: NCM), Northern Star Resources Ltd (ASX: NST) and Evolution FPO (ASX: EVN) would each be making money based on their most recent September quarter All-In Sustaining Costs, while several other gold miners would slip into loss making territory.
Importantly, although analysts can get it wrong and much can happen in the space of a year, based on forecasts made last year, the general consensus could be surprisingly accurate.
