Gold and Silver Predictions for 2013 - The Weekly Gold Forecast

Thursday, 20 December 2012
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Published in From The CEO

As we move closer to the end of 2013, and official fiscal-cliff argument toggles back and forth, it’s all too easy to sink into despair. Particularly if you’re a precious metals investor.  What in the world happened to gold predictions of $1,800 by the end of this year?  And what in blazes became of silver predictions surpassing the all-time high of $52 per ounce reached in 1979?  Are precious metals about to tank?

We need to step back and look at the total picture.  In doing so, as recently as a month ago, analyst Jeff Clark offered a graph of the gold price vs. an adjusted monetary base.  His conclusion?  He’s not at all deterred by a short-term consolidation.  His gold prediction for the end by year-end 2014 logs in at $2,500 per ounce.  Given gold’s current tendency to tightly cling to the low $1,700 level, Clark’s gold prediction makes classic sense.

Fiscal-Cliff

His reasoning is that as long as the Fed sustains quantitative easing “through eternity,” continued printing of money puts an upward pressure on gold prices.  Clark observes further that as prices rise and attract many more investors, supplies will become limited, thus driving up prices even further.  Premiums on coins, he also mentions, tend to rise at times like this. 

Since the great mass of investors waits until prices move very high before buying, others will crowd into the market like sheep, concludes Clark.  “The average investor won’t want to be left behind,” he reasons.  This kind of behavior is generally true of investing in general.  The dot.com mania of the 1990s is a good example.  People rush into a market based on rumor and saturated media coverage.

Peter Krauth, the global resources specialist for Money Morning, is even more ambitious about his silver predictions.  He bases them on a common pattern that’s evident in the relationship between gold and silver.  Although silver moves “almost in sync with gold,” it does so dramatically.  Krauth sees silver as “gold on steroids.”  Consequently, he predicts that the gold/silver ratio will move to 20 in the long term.  Today the ratio of gold-to-silver runs about 52.68.  A move to 20 would suggest silver will move up much faster than gold.  So if gold indeed goes to $2,400 per ounce in 2014, look for silver to move to $120.00 per ounce.

Given this background, we interpret the sluggishness of gold and silver prices as a bullish sign.  Metals have not tanked at al.  Gold and silver are holding their support levels.  This suggests that investors are watching and waiting.  Some may, as UBS suggests, be looking for a better deal.

If you’ll forgive us the play on words, everything now hangs on the fiscal-cliff discussions.  The fundamentals remain in place.  So do not short-change your own gold and silver predictions. Once again we stress, don’t wait to buy.  Better to buy and wait.  Beat the herd.  The precious metals bull market is far from over.

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Trevor Gerszt

Trevor Gerszt has been passionate about gold since childhood. Growing up in South Africa, the world’s second largest gold producer, Gerszt spent his youth collecting gold coins. Surrounded by a family of experienced coin collectors, he gained valuable insight about the precious metal.