The Nightmare Scenario For Gold Investors That Could Cause The Market To Crash

thenews 2013.04.02 16:54

Société Générale analysts are quite bearish on gold. Their $1375-per-ounce price target for the end of 2013 puts them well below most of the Street.

Today, the SocGen team, led by Patrick Legland and Michael Haigh, released a new report titled "The End of the Gold Era."

A $1375 price target implies a 13 percent decline from today's levels by the end of the year, but the analysts also examine a "bear case" for the shiny yellow metal that is even worse than their already-bearish call.

It hinges on a "perfect positive macro storm."

Below are their thoughts on such a "bear case" would play out:

Our central scenario calls for a gentle bear market over the next several years. The question we address here is: what could cause an even greater decline even further than our forecast? Specifically, what would it take to send gold prices dramatically down: 20–30% (a crash) in a much shorter period of time? Simply put, we need the perfect positive macro storm to impact the market which would then influence gold’s ‘fundamentals’ and currently this is a tail risk and is not terribly likely (see our base and bull case scorecard on next page). Nevertheless, we outline what it would take in this report.