Not a bank afraid to shock any cozy consensus around, Danish firm Saxo Bank has issued a number of “outrageous predictions” for 2010, including a forecast that the Chinese currency will sharply fall, a third political party will emerge in the US and gold prices will slide.

For instance, it predicts that the VIX index of US equity volatility – which rises when investors grow more anxious about stocks – will drop to 14. The VIX could fall from 22.32 to 14 as trading ranges narrow and implied options volatility declines.

The Chinese renminbi will devalue by 5 per cent against the dollar, Saxo says, because the efforts of Chinese authorities to stem the credit growth and avoid bad loans, combined with the creation of several growth bubbles, will show that the Chinese investment-driven growth is deficient. “The massive, Chinese spare capacity and the economic backdrop could be a deciding factor in devaluing the CNY vs. the USD,” the investment note said.

Saxo also reckons gold, currently trading over $1,100 per ounce, will drop to $870 in 2010 but will rise to $1500 in 2014, Saxo says.

“A general strengthening of the dollar could break the back of the recent speculative element in gold. Although we are long term bullish on gold (believing it will reach $1,500 within five years), this trade seems to have become too easy and too widespread to pay out in the shorter term,” Saxo says.

Turning to politics, Saxo predicts that the traditional dominance of the Republicans and Democrats in the US will be challenged by the emergence of a third party. Angry US voters, Saxo says, are concerned that the major parties are not addressing their worries.  (The Green and Libertarian parties in the US have tended to attract only a relatively small slice of the vote.)

The bank also predicts that US Social Security, the country’s state pensions savings system, will go bankrupt.

“This is not so much an outrageous claim as an actuarial and mathematical certainty. The outrageous part is that social security taxes and contributions have been squandered for so long,” Saxo says.

“2010 will be the first year where outlays for the non-existing trust fund will have to be part-financed by the federal government's General Fund,” it said. “Part of the social security outlays will have to be financed by higher taxes, more borrowing or more printing.”

In one of its most blunt predictions, Saxo says the price of sugar will drop one third.

“Despite a recent spike in prices caused by Indian drought and above average rainfall in Brazil, the forward curve already indicates considerable downside beyond 2011 so a return to more normal weather conditions in 2010 would make sugar one of the less inspiring commodities,” it says.