Gold 2013 – What is the trend for the gold price in 2013 and beyond?, 11/29/2012

Scenarios for 2013 and the gold price trend

The overarching driver of the gold price for the year 2013 and beyond will be the development of global financial crisis. The levels of debt piled up by Western governments and often also corporate/private sectors are still not sustainable. There is basically one scenario to get rid of this burden: disciplined deleveraging, i.e. reduction of debts. The alternative, which was pursued over the past years, is to create more debt. This could eventually lead to inflation levels significantly above the inflation rates we saw during the last decade in Western currencies.

Either way, both a deleveraging, which will probably be long and painful (‘the lost decade’), or a reduction of the real debt pressures by means of higher inflation will potentially preserve gold as an attractive insurance asset or store of value for many conservative investors in 2013 and beyond. Geopolitical risks, e.g. in relation to Iran, will support this position of gold as a ‘safe haven’ further.

Gold price forecasts 2013

For the fourth quarter of 2013 analysts surveyed by Bloomberg in November 2012 forecasted a level of US dollars 1,925.- per ounce of gold.

The bullion bank ScotiaMocatta forecasts a rising gold price in 2013 and would not be surprised to see a gold price above US$ 2,200.- per troy ounce of gold.

The French Bank BNP Paribas estimated in November 2012 gold to reach US dollars 1,675 per ounce in 2012 and US dollars 1,865 per ounce in 2013. On the other hand, Thomson Reuters GFMS expects the peak of the gold price for end of 2012 or beginning of 2013 and a following decrease in the price of gold from 2013 on. In November 2012, members of the London Bullion Market Association forecast a gold price of US dollars 1,843.- by September 2013. The global bank HSBC predicts a very similar gold price of 1,850 US dollars per ounce of gold in 2013.

The CEO of the largest US gold mining company Newmont Mining estimates that the price of gold in 2013 may increase to US dollars 2,550.

In November 2012, Deutsche Bank updated its forecast on the gold price to US$ 2,000.- by next year, i.e. 2013. Credit Suisse expects a gold price of US$ 1,840.- in 2013, while in October 2012 private bank Coutts predicted gold prices to reach US$ 2,000.- in the coming months.

Outlook on Gold 2013 and beyond

The diversity of analyst predictions with regard to the gold price in 2013 and the following years mirrors the uncertainties in the global markets.

An interesting fact about gold is that it often performs well in scenarios of deflation (for instance driven by global debt reductions) but also in scenarios with higher than usual inflation rates (which could potentially occur as public debt level increases further).

Gold therefore tends to perform positively in times of economic uncertainties as well as in acute crises. Unfortunately, the global financial problems are not yet sorted out. Some credible commentators expect several more years of uncertainty and painful deleveraging, which could end only when we are approaching the next decade.

Thus, in the foreseeable future a moderate allocation to gold will remain the imperative for many investors and could result in a positive trend of the gold price 2013 and beyond. Portfolio diversification, i.e. the allocation of funds to different asset classes and investments, should remain an imperative for safety-orientated investors over the coming years.

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