Commodities analysts at Deutsche Bank think that most of the fall in gold has already happened as gold prices tumbled over the last month:
The sell-off in gold is still some way short of the price declines that occurred following the collapse in gold prices in the early 1980s. However, at that time real US interest rates rose rapidly as the Fed tightened monetary policy aggressively. We doubt a repeat of such action and consequently view a large part of the gold price correction may be behind us.
Precious metals and specifically gold have suffered the heaviest losses of the five broad commodity sectors this year. This begs the question as to whether the extent of gold price losses has gone beyond fundamentals and whether the market is now moving into oversold territory.
Lessons from history suggest that although gold price losses have been extreme, the extent of the price correction today is still some way short of the percentage declines that occurred in 1980-1. However, we would classify events over 30 years as significantly different since at that time US short term interest rates rose to 20% with real interest rates also rising rapidly. As a result, while we still view Fed policy as a strong headwind to gold returns, it is possible that the major part of the gold price correction has now already occurred.