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Is gold set for a big fall in 2014?

Is the golden run about to come to an end? Just two months into the new calendar year and the price of gold has staged a surprising recovery, rising over 11% to around US$1,342 per ounce.

However suggestions of lower demand from China and positive economic data from the U.S. could see the price for the metal flatten out, and even fall throughout 2014 analysts say.

While there is always a big range of opinions on the future of gold, one widely held view is that a recovery in the U.S economy will speed up later in 2014, dissuading investors from gold.

There have also been fears this week that poor Chinese economic growth and stronger than expected U.S. employment figures could speed up falls in the gold price.

This might only be speculation, but gold miners have still taken a hammering so far this week. Shares in Newcrest Mining Limited (ASX: NCM) have been pushed down 5% to $11.39, while Silver Lake Resources Limited (ASX: SLR) is down 11.7% and closed yesterday at $0.45.

The falls could be part of a wider sell off of resource stocks, including BHP Billiton Limited (ASX: BHP) and Rio Tinto Limited (ASX: RIO) which are down 4% and 5.8% respectively since the start of the week, but the threat of a short lived gold recovery is likely to be hanging over investors’ heads.

Deutsche Bank Head of commodities research Michael Lewis is sticking to his view that gold will head to US$1,100 in 2014, while others are equally grim.

In January Bank of America Merrill Lynch cut its average 2014 forecast by 11%, to US$1,150 an ounce and Bloomberg’s BusinessWeek last month quoted Societe Generale’s head trader in London forecasting a price of US$1,050 for the fourth quarter.

As Societe Generale is one of the banks involved in setting the price of gold, you might expect they would have a better idea than many on the future direction of the metal.

Foolish takeaway

For now the gap between analyst predictions and reality keeps easing wider. This is at odds with the recent share price falls for Newcrest and Silver Lake Resources, suggesting the bearish mood of analysts may be rubbing off on investors.

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Motley Fool contributor Regan Pearson does not own shares in any of the companies mentioned in this article.

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