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Ruth Crowell, LBMA

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Ruth Crowell (pictured), CEO of the LBMA comments on predictions for gold and silver over 2020…

The Danish physicist and Nobel prize winner Niels Bohr, once wryly commented that “Prediction is very difficult, especially if it’s about the future.” True as that may be, it is an unfortunate reality for most markets including precious metals, that without predictions, however accurate or otherwise they are, few investors would choose to commit.

Ruth Crowell (pictured), CEO of the LBMA comments on predictions for gold and silver over 2020…

The Danish physicist and Nobel prize winner Niels Bohr, once wryly commented that “Prediction is very difficult, especially if it’s about the future.” True as that may be, it is an unfortunate reality for most markets including precious metals, that without predictions, however accurate or otherwise they are, few investors would choose to commit.

With this market need in mind, LBMA, the only independent authority for precious metals, has since 1998, organised a competition for professional precious metals analysts to forecast the average price range of gold, silver and, more recently platinum and palladium for the year ahead. The 2020 entry comprises 37 gold analysts from 10 countries, and 27 silver analysts.

Before looking at the forecast numbers for 2020, it may be helpful to see how accurate the analysts’ group was last year. 2019 was a strong year for precious metals: Gold gained 18.3 per cent in dollar terms and 13.3 per cent in sterling; silver was almost as strong, up 16.9 per cent in dollars and 12.1 per cent in sterling. The average price for gold during the year (on which the LBMA competition is based) was USD1,392.60, and silver USD16.20 (in both cases per troy ounce).

In terms of forecasting, the silver analysts were pretty much on the money averaging USD16.28 so only eight cents high; the gold folks, however, turned out to be too pessimistic – more than USD80 below the actual average price with even the competition winner still more than USD27 off on the low side.

The question now on the minds of investors, and there are many of them who view precious metals as a core component of an investment portfolio, is whether we’ll see the same sort of price gain in 2020 as in 2019 or whether, by buying in now, they’ll be committing that common mistake of attempting to chase a previous year’s strong numbers.

Certainly the retail press is filled with enthusiastic commentary about gold funds and gold ETFs and through January it was almost impossible to turn the pages of one of the UK’s free newspapers without being confronted by an advertisement for gold sovereigns or equivalent bullion coins or medallions. Silver, for some reason, has been less frequently touted.

Meanwhile the professional wholesale market for gold became very active at the beginning of the year. Following the killing of the Iranian General Qasem Soleimani, the gold price gained some 4 per cent in the first five days of trading to a near seven year high and the turnover in the London OTC Market on 8 January, as measured by LBMA-i, equated to USD86.4bn (the highest recorded), over 75 per cent higher than the current norm.

Despite the fact these high-volume moves took place before the analysts’ competition entries were due in, and therefore the price volatility could be taken into account, a mood of caution prevailed among professional gold, perhaps less so for silver analysts looking forward into 2020.

At the time of writing, 31 January, gold opened at USD1,578.25 and silver USD17.725 . The median analysts’ forecast for the average 2020 price is USD1,558.82 for gold and USD18.21 for silver. 

That said, the analysts are, in fact asked to predict a price range rather than an individual figure and the average figures here are USD1,443.93-USD1,688.63 for gold and USD16.51-USD20.49 for silver. Quite a wide spread – 17 per cent for gold and 24 per cent for silver – which almost certainly indicates uncertainty. And note, these numbers were calculated prior to the outbreak of the Coronavirus.

If uncertainty is the prevalent theme for 2020, even among the professionals, then they’re in good company. No lesser figure than the then Head of the US Federal Reserve Bank, Ben Bernanke included the following comment in his conversation with the Senate Banking Committee in 2013: “Nobody really understands gold prices, and I don’t pretend to understand them either.”
 

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