Morgan Stanley has cut its 2014 gold target

For over a decade, gold had a tremendous bull run before the precious metal suffered a correction in 2013. What more, it is likely that these losses could be extended in 2014 as well. That is why Morgan Stanley has cut its 2014 gold target by around 12% to US$ 1,160 an ounce. One of the reasons why gold found so many takers was the loose monetary policies of central bankers around the world. As the value of paper currencies began to be questioned, gold came to be regarded as a tangible, real asset having value. It was looked upon as a safe haven and a hedge against inflation. The tide turned against the precious metal in 2013 when the US Fed declared its intention of tapering the QE program. As equities began to evince interest, gold lost ground.

As per an article in Money news, Morgan Stanley is of the view that there is more pain to come for gold because US equities will continue to perform strongly. We believe that while the Fed has decided to reduce its bond purchase program, interest rates still continue to hover near zero. Besides, whatever recovery has been seen in the US economy has been the product of Fed policies. So once the Fed withdraws support, there is the possibility of the economy slumping once again. This may prompt the Fed to loosen its strings again. Which is why we believe the case for gold remains strong from a longer term perspective. And any correction should be looked upon as an opportunity for the metal to form part of one's portfolio.