Analysts Raising 2012 Forecasts
By: Ross Norman Far from lowering their 2012 gold price forecasts in the light of recent volatility, many mainstream analysts have actually been raising their predictions for the year ahead seeing unchanged fundamental support. Analysts raising 2012 forecasts affirms that bullish views are being maintained.
August and September saw unusual price volatility in gold, not just in the stock markets, with developed markets dropping about 15% and emerging markets indices falling over 25%. Gold, the usual “hedge” during extreme financial turmoil, rose or fell by over 3% on 8 occasions and declined 15% from peak to trough in the past 2 months alone. These are the sort of moves one might in former years have expected over the course of a full year.
During this period, dollar assets have been favored by investors, rising 6% and US 10-year Treasury yield falling by 88 basis points (0.88%). As such, it is a good time to review analysts’ early forecasts for 2012 gold price to see if they are changing their tunes or if they view any changes in gold fundamentals
Broadly, analysts are holding on to their bullish views and several have actually raised their 2012 gold price forecasts.
- The Bloomberg median analyst forecast for the gold price in 2012 rises by about 27% from $1,406 as of 30 June to $1,781 as of October 5th.
- Natixis, the more conservative among the lot, raised its 2012 gold price forecast this Monday by 11.5% to $1,450, followed by Credit Suisse who raised its price forecast by 19% to $1,850 on Tuesday.
- Goldman reiterated its 12-month forecast at $1,860, seeing no changes in fundamentals.
- BofA Merrill Lynch and Barclays’ analysts continued to maintain their 12-month forecast of a gold price of $2,000.
- Barclay viewed the gold price correction as a temporary move and a buying opportunity.
- Morgan Stanley this week hiked its 2012 forecast by an eye-catching 35% to $2,200.
Gold prices fell from $1,000 to $715 from February to October 2008 at the height of the Lehman’s crisis when investors sold their profitable assets such as gold, to cover losses in other risky assets as the then global crisis deepened, before rising rapidly afterwards.
This time around the tune is similar. Also strong physical demand especially from Asia and steady ETF assets continue to support gold prices, and as such this seems to have cushioned the decline.
All Things Considered – John’s Commentary:
The trend is up. Never bet against the trend. The trend is like the “house” in Las Vegas – the odds always favor the primary trend – just like the “house”. Simply stay with the trend.
Dips will come, and when they do, they are buying opportunities only. They are not a time to consider selling in the hopes of buying back at cheaper prices.
Silver is a tremendous value in the low $30’s. Watch for a gold:silver ratio of 57:1 to consider exchanging some of your gold for silver with the expectation that silver will outperform.
Quote of the day: “Gold and economic freedom are inseparable.” – Alan Greenspan
