2014: The return of the gold bulls

Gold analysts are at their most bullish for over a year, according to Bloomberg News. Of the 21 analysts surveyed, 15 expected gold to rise this week, two were bearish and four were neutral. This represents the highest number of bulls seen in the survey since December 2012.

The survey follows a Capital Economics note on Friday, which concluded that expectations for the precious metal are already so low that the risks for 2014 are toward the upside.

Gold took a hammering in 2013, suffering a 28 per cent decline - the largest fall since 1981. The failure of the Eurozone crisis to escalate and an improving US economy combined with the Federal Reserve's start of tapering, dealt a severe blow to those gold investors who believed 2013 would be a year of economic gloom.

However, a resurgence in demand from emerging economies as well as the uncertain path of Bitcoin could see a modest rise in the price of gold, according to the London-based consultancy:

The poor performance in 2013 has left the precious metal looking attractive again compared to other assets, including equities.

The bursting of the Bitcoin bubble may even make gold look more appealing to Chinese investors.

For now we are happy to reiterate our view that the price of gold will revisit $1,400, at least, in 2014, and probably go higher.

There may also be broader reasons why gold could surprise analysts over the course of 2014 and beyond.

Some gold bulls maintain that the recovery seen in the US is unsustainable and mirrors many of the problems seen before the financial crisis of 2008. Prior to 2004 there was an improving economy and the Federal Reserve had cut interest rates to one per cent - the lowest in 40 years.

The US recovery so far has been far from spectacular. Median income in the US and the percentage of the population employed remains below pre-crisis levels despite extraordinary levels of monetary stimulus. The Bureau of Economic Analysis shows that towards the end of 2013, personal spending rose faster than income, while the savings rate fell.

Gold bulls have stressed the recent travails of the precious metal are largely confined to the swings that come from those who speculated on gold as a short term investment.

Chairman of Euro Pacific Precious Metals, Peter Schiff said:

In times like these, long-term gold investors feel like the designated drivers in the corner of a frat party. It might seem like we're missing the fun, but we must remember that we're playing a different game than the short-term speculators.

Our drunken friends have had some cheap thrills in 2013, but this stock market growth rests on an unstable foundation of artificial stimulus and cheap money.

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