[miningmx.com] — SO there’s guy in a bar somewhere near you who’s view of the gold price is likely to be just as inaccurate as any stockbroker’s.
This was one of my favourite ways of saying no-one has the faintest idea where the gold price is headed. Well, in almost 13 years in mining reporting, I would suggest that, for the first time, this analogy doesn’t cut the mustard. In fact, in a world of economic uncertainty, the gold price’s continued good health is the certainty of 2011.
The reasons are out there and obvious, but it’s worth recapping starting with the fundamental reasons for gold’s continued strength.
The Eurozone crisis is expected to continue in 2011 with Portugal and Spain likely to refinance themselves during the year. Quantitative easing, the pumping of liquidity into financial markets, is likely to be extended next year. Quantitative easing has been positive for gold in the past and will be so again.
These two factors, financial crisis and exogenous economic stimulua, are a symptom of poor confidence in the global economy, but they produce the confidence in the ability of gold to act as a hedge. So expect continued net buying by central banks and continued support for physical gold as a store of wealth, chiefly in areas such as India.
Now for the difficult bit. While there’s broad agreement gold has another year of gains in 2011, and possibly for 2012, just how confident should one be?
Well, very confident according to the experts. Goldman Sachs reckons gold prices will peak at $1,750 per ounce during the course of 2012 realising a peak of $1,690/oz during next year. However, the stockbroker sounds a note of caution. US interest rates will start to rise again in 2012, it says.
Deutsche Bank forecasts $1,450/oz for the year while BNP Paribas thinks $1,500/oz is likely. Contributors to Bloomberg’s consensus set gold at $1,362oz in 2011 falling to $1,300/oz in 2012 and $1,150 and $1,000/oz in 2013 and 2014.
RBC Capital Markets, looking shorter term, expects the gold price to test $1,500/oz in the early part of 2011. It adds, however, that the outlook for the South African golds remains pretty strong with the rand likely to stabilise at between R7 to R7.50 against the dollar. Interestingly, it thinks there’s value in the South African junior mining firms such as Great Basin Gold, Gold One International, and Pan African Gold, as well as Harmony Gold and Gold Fields.
Gata, the gold market activist that serially accused the world’s bankers such as Goldman Sachs, for artificially suppressing the price of gold, were fond of always calling gold at ever ambitious levels, usually $2,000/oz to $3,000/oz. I don’t know what Gata is forecasting for the gold price now but these levels are no longer whacky, no longer the playgrounds of conspiracy theorists or paranoics.
Jeffrey Nichols of US-based stockbroker, Rosland Capital thinks $2,000/oz is possible next year. One would like to scoff, but 2010 represents the tenth successive year the gold price has ended higher. In 2000, gold was at $273/oz. The world is burning. Who dares say the advance won’t continue?
