Further long-term gold price forecasts

Gold price forecasts 

Further downward revisions to precious metal price forecasts have been made with the arrival of another month of the new year. Goldman Sachs lowered its expectations for gold prices in 2013 and 2014 by 5% and 4%, respectively. It currently forecasts an average gold price of $1,787 per ounce in 2013 and $1,744 per ounce in 2014. At the same time, its long-term forecast has been lowered by as much as 15% to $1,200 per ounce. The rationale is the expected rise in real interest rates in the United States along with economic acceleration, which the bank expects to occur in the second half of 2013.

Citigroup lowered its gold price forecast for the current year by 4.2% to $1,675 per ounce and by 0.2% in 2014 to $1,653 per ounce. The forecasts for silver remained unchanged. However, forecasts for platinum and palladium have been raised. For the latter metal, the long-term expected price has been raised by 13.3% to $680 per ounce, while in 2013 it has been raised by 4.2% to $775 per ounce. For platinum, the long-term forecast has been raised by 2% to $1,531 per ounce, and the forecast for 2013 by 1.5% to $1,700 per ounce. 

Morgan Stanley has reduced its expectations for gold prices this year by 4% to $1,773 per ounce and silver prices by 4% to $33.44 per ounce. However, it maintained its bullish stance on gold prices, despite recent selling pressure caused by market concerns about an earlier-than-expected tightening of monetary policy in the US. Morgan Stanley expects that very low nominal interest rates, ongoing QE3 commitments, and a slower-than-expected recovery of the US economy, putting pressure on the Fed to maintain its loose monetary policy, will be sufficient incentive to buy gold, regardless of its current price.

At the same time, according to Morgan Stanley, silver should be a much more interesting investment this year, despite its high volatility. In the medium term, palladium and platinum are recommended for purchase, due to the reduction in their production, including by Anglo American Platinum. According to Morgan Stanley, in the long term, platinum prices will return to parity with gold prices and remain at higher levels. This year, however, the average price of platinum is expected to be $1,715 per ounce and palladium $708 per ounce.

Barclays Bank was the only one in the recent period not to lower its forecasts, maintaining its expectation of an average gold price of $1,710 per ounce in the first quarter of 2013 and $1,778 per ounce for the whole year.

Why this change in analysts' attitudes toward gold prices? 

Analysts predict a decline in gold prices in the long term, based on the current market situation. Casey Research has conducted an interesting analysis of analysts' gold price forecasts, which has shown their fallibility. It takes into account the average of four-year forecasts provided by 25 analysts from the world's largest investment banks. According to them, since 2007, the average forecast has always predicted a decline in gold prices in the long term. For example, the average of the 2007 forecasts predicted a decline from $656 to $523 per ounce by 2011. In fact, in 2011, the average price of gold was slightly below $1,600 per ounce. So, as you can see, analysts are quite conservative in their forecasts, and there is a high probability that they will once again prove to be wrong.