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Gold 2013 – What is the trend for the gold price in 2013 and beyond?

April 04, 2013

By the end of 2012 the gold price had increased on an annual basis in each year of the last decade. But in the first months of 2013 we saw a decreasing gold price. What is the forecast for the gold price 2013 and beyond? Will the 10-year upwards trend of the gold price continue in 2013?

A majority of gold investors views gold more as an insurance or store of value than as a means of speculation. These investors therefore regularly take a longer-term view on gold as an investment. What trend of the gold price can we expect in 2013 and for the following years? Gold price forecasts will never be completely accurate, but we collected some information on the key drivers influencing the gold price and analysts’ gold price forecasts for 2013.



Review of Gold in 2012

The gold price started into the year 2012 at US dollars 1,531 per ounce. Over 2012 the gold price had increased by about 8% to about US dollars 1,657. In September 2012 the price of gold had even peaked for that year at roughly US Dollars 1,792.

In euro terms the price increase for 2012 was nearly 6%.

In the first three months of 2013 the gold price has fallen by about 5% to US dollars 1,552 on April 3rd. In Euros, the decrease was much lower with only about 2%, and in British Pound the gold price even saw a slight increase of about 1% over the same period.

Drivers of the gold price

The gold price is – as the price of any commodity – driven by the basic laws of supply and demand. The demand for gold falls into four sectors: The official sector, i.e. central banks, jewellery, technology, i.e. industrial and dental sectors, and private investment.

In 2010 the central banks have developed from net sellers to net buyers of gold, driven by a decrease of sales from developed countries and an increase in buying activity from developing countries. The central banks continued to increase stocks in 2011 and 2012. Given the low percentage of central banks asset allocation into gold of emerging countries like China (2% versus about 70% in countries like the United States, Germany and France), there is a solid chance that the official sector will continue to be a net buyer of gold in 2013 and even beyond 2013.

Over the last decade jewellery demand for gold decreased in relation to demand from other sectors, mainly the investment sector. High gold prices and economic uncertainties will likely keep gold demand from jewellery moderate in 2013. Nevertheless, demand from jewellery amounted in 2012 with 43% to the largest share of total gold demand.

Gold demand for industrial purposes and dental uses accounted for just about 10% of total gold demand in 2012. As for jewellery demand, high prices and potentially low/volatile growth could further dampen demand for gold for industrial uses in 2013.

As the second largest driver of gold demand, the demand from the investment sector accounted for about 35% of total demand in 2012. Amidst the money and debt creation by major economies and following the financial crisis, which started in 2007, the demand for gold as an investment sustained its high levels 2012.

While during the previous gold price peak in the second quarter of 2010 the demand came nearly in equal parts from gold securities like Gold ETF and physical gold in the form of bars and coins, this changed at the gold price peak in the third quarter of 2011, when nearly 80% of investment demand flowed into physical gold, e.g., in the form of professionally vaulted gold. Also in 2012, about 82% of investment demand came from physical gold products. This indicates that safety is a major concern for gold investors, who usually view physical gold or vaulted gold as more safe than so called ‘paper gold’ (see our comparison of different forms of gold investment).

The second important driver of the gold price in addition to the demand factors is the supply side. The supply of gold is composed of mine supply, i.e. gold production, and gold recycling.


 


Mine production reached a new high in 2010 and increased a little bit further in 2011. In 2012, overall supply of gold – from mine production and recycling – decreased slightly, i.e. there is currently no negative pressure on the gold price to be expected from the supply side.

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 the global financial crisis or more potentially more correctly regional financial crises. The levels of debt piled up by many Western governments (not to forget Japan) and often also corporate/private sectors seem still often 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.

After the decline of gold prices in the first three months of 2013, several analysts updated their forecasts for the gold price. For example, Societe Generale lowered its estimated gold price for 2013 from 1,700.- US Dollars to 1,500.- US Dollars and the price forecast for 2014 from 1,600.- to 1,400.- US Dollars. Historically speaking, analysts have often followed the actual gold price movements and extrapolated current trends. It is to be seen, what quality the current forecasts will have in the future.

Outlook on Gold 2013 and beyond

The diversity and fluctuation 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.

As with every investment, fees are a key performance driver to be considered when investing in gold. Vaulted gold, i.e. gold stored in professional vaults, can offer investors outright gold ownership at reasonable fees combined with high liquidity and safety. Investors would be well advised to compare gold investments.

[Last update: April 4th, 2013]


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22 Comments to Gold 2013 – What is the trend for the gold price in 2013 and beyond?

  1. casmige wrote:

    Re: “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. ”

    There is a third possibility that I never see bantered about, discussed, broached, discussed nor offered as a consideration of reviewed as to the effects of it on the price of Gold Short-term or Long-term & that is utter & abrupt devaluation of the U.S. Dollar coupled with a wiping away of all leveraged “Debt” (Other-wise known as bankruptcy) in order to “Correct” things as a means of last result should the USD be the one & only left standing currency, still shouldered with unsustainable & un-repayable Debt, after a world-wide economic down-turn.

    I did this personally when I was laid off of abruptly from my Tech Job (As a Quad-Lingual) in 2009: I did not file bankruptcy but what I did do is contact my creditors & settled $55K USD worth of Credit Card Debt for a Lump-Sum Payment of $12K USD.

    Now, just a few years later I am again enjoying a Fico Score about @ 700 (Down from 750) & now am owned by my own business.

    I see this scenario as being the way out for The USA & its debt threshold which correctly tallied already Grossly EXCEEDS GDP.

    Any Thoughts on this as to what the price of “GOLD” or any other precious metals might do??,

    I see it merely settling down dollar to dollar along WITH the “Correction”.

    What say yous guys??


  2. sandeep garg wrote:

    i think that gold should have rang bound 1650$ to 1825$ in first and second qtr and also very gambling in 2013.


  3. Gold Finger wrote:

    Now that the election is over and Barack Obama is our president for the next four years, gold prices will definetly be on the rise.

    1.) Captial gains will be going up come Jan 2013 meaning there will be a huge sell off. Stocks will go down gold will go up.

    2.) The president is estimated to increase the deficit by another 4 trillion dollars. The bigger our deficit the higher gold will revalue itself.

    3.) The president’s spending may cause China to stop investing in the dollar and form a new currency with the Central Banks which would deplete the value of the dollar.


  4. Hamid wrote:

    i agree with Jonathon but not at $1000 an ounce by end of 2013 , maybe around 1200-1400. But there is another section that banks looking to create more oscillation to make more liquidity in the Gold market . So I think the next year will be very interesting as well risky for gold market . we must be ready to see the gold price at the range of $1200 – 2800 an ounce in 2013. Gold market is a gamble in 2013…


  5. Mehmood wrote:

    I believe the Gold will not cross the 1800 main resistance till year end 12. Gold will bounce back to level 1840 – 1870 in the begging of next year and then will drop down to 1600 level in the mid of next year. The price in 3 or 4th Quarter 2013 depend on the US unemployment rate and further QE etc which will set the direction for the Gold to either retest 2011 High or to remain Range Bound.


  6. Trustable Gold wrote:

    According to the median of 16 gold price forecasts compiled by Bloomberg, the price of gold will rise every quarter in 2013 and average US$ 1,925oz in the last quarter of that year.


  7. Jonathon wrote:

    Look at the predictions early in 2012 they say gold at 2,000 an ounce by years end and they are ALL WRONG .. with the govt of the US back into office the ptrediction now is a massive depression mid to late 2013 due to unemployment production falling off and deficit in the clouds, Strangely gold prices will fall because of lack of money and no buyers ..gold will be at 1000 an ounce by end of 2013.


  8. Another Chris wrote:

    “A sale of the reserves would have no significant impact on the public debt of the United States but further undermine trust in the U.S. Dollar.”

    At today’s prices. A statement by central banks that they stand ready to buy gold at $60,000/oz would take that 3% coverage to 100% coverage and balance the CB balance sheet. The treasury and central bank can then net out the difference, and reset to zero.

    There are few immediate consequences* to this action as gold is not use for any useful purpose in society.

    * Besides not resolving the root cause.

    This is the likely resolution to the problem as it’s the past of least resistance. I expect this to as the ‘next line of defense’ in a Lehman type event in the future.


  9. Nazmi wrote:

    In light of the fall of the PIIGS, i think, gold price will stabilise at around USD 1800, and will start to reach USD 1900 once Spain declare that it needs financial help from the EU.
    The China argument is interesting. But i think China is embracing capitalism so much that it just want to create wealth no matter what, holding wealth values (i.e commodities) are last in their minds.


  10. gold account wrote:

    Gold price forecasts for 2011 through 2013 were recently reduced by troubled French Bank, BNP Paribas , following the recent volatility in gold price valuations. In the near term, a further correction in the gold price may be warranted with physical gold sales and investment redemptions being realized to offset losses in other asset classes. Over a medium to longer term investment horizon, Precious Metals Research Analyst Anne-Laure Tremblay remains optimistic, “We see the gold price peaking in 2013, as the market starts to anticipate monetary tightening in the United States, but do not expect a sharp fall thereafter.” BNP Paribas reduced its near term outlook on gold prices to average $1,730 per troy ounce in the fourth quarter, down from its earlier estimate of $2,170 per troy ounce and further reducing its target 2012 gold price forecast to $1,950 per troy ounce.


  11. Trustable Gold wrote:

    In a new research report Deutsche Bank predicts that the gold price will rise above US$ 2,000 in the first half of 2013.

    Analysts of bank of America forecast a price of US$ 2,400 for gold over the time frame until 2014 under the assumption that the quantitative easing is being continued.


  12. Bright wrote:

    After the open ended (QE3) programme, I believe most of these forecasts need to be reviewed higher


  13. Trustable Gold wrote:

    Several new gold price forecasts were released in early September 2012:

    Thomson Reuters GFMS, a precious metals research company, predicts a gold price above US$ 1,800 by the end of 2012 and a price above US$ 2,000 in the first half of 2013 “before starting a secular decline later that year”.

    The Swiss bank UBS increased its one-month and three-month gold price forecasts to US$ 1,850.

    And finally, the pan-European banking group Unicredit issued its ‘Commodity Outlook’ that predicts a gold price of US$ 1,900 by end of the year 2012 and an average price of gold of US$ 1,900 in 2013.


  14. Jesse wrote:

    Good boy Chris, you tell him! The average debt per US person is $51,000 and rising. This includes the children, elderly, disabled and unemployed. There is no way we’re paying this off. This can be ignored or addressed.


  15. Chris wrote:

    @Trustable Gold

    …and to add to the precious argument: A large share of the US currency reserves is held in gold (approx. 75%), but the total holdings have a worth of just about US$ 350 billion. US public debt in comparison is above US$ 10 trillion. The gold reserves only amount to about 3% of public debt.

    A sale of the reserves would have no significant impact on the public debt of the United States but further undermine trust in the U.S. Dollar.


  16. Trustable Gold wrote:

    @Karthigeyan

    Fortunately or unfortunately the US have another option: They just could print more money and buy their own debt papers, i.e. monetarize debt.
    Eventually this could lead to high inflation, but it means that there would be no need to sell gold holdings.


  17. Karthigeyan wrote:

    @Ysuf Ayaz

    If China is to say they are not buying US T. Notes anymore, then wont the US need to liquidate their Gold (which is 70% of their savings?) to pay of their debt? In that case, wont the Gold price rally down? China has invested only 2% into Gold. If the price rallies down, China would keep buying it until it empties US and then it would dominate to increase the prices. Does it make sense?


  18. Yusuf Ayaz wrote:

    It is not the gold increasing in value, it is the paper money being watered down.

    Gold is a unit of measure which does not change, it is our promissory notes (paper money) losing their credibility.

    All it takes is China to say “I am not buying US T. notes anymore because I do not believe they can ever pay it back”

    Then watch the gold prices taking off…

    This scenario would hurt China as well simply because they have enermous amount of US dollars but it would have a devastating effect on US economy…

    Just my two cents…

    Y.


  19. Trustable Gold wrote:

    Goldman Sachs released a research note that sets the price targets for gold to USD 1,785 per ounce of gold by end of June 2012, USD1,840 by end of September 2012 and USD 1,940 by the end of year 2012.

    Goldman Sachs assumes that “subdued” growth prospects in the United States will likely support the price of gold in 2012 but also sees potential “risks” in case that US economic data should develop better than expected.

    In contrast to Goldman Sachs’s view, CPM Group, an independent commodities research and investment banking company, assumes that gold prices will probably not rise above the record levels from 2011 but the price should stay above USD 1,500 per ounce in 2012 and USD 1,400 in 2013 and the following years.


  20. Trustable Gold wrote:

    Christopher Wyke of Schroder Investment Management expects gold to trade at about $ 2,250 by the end of 2012.

    According to Wyke, the bull run might last a further five to eight years, with the price coming near to $5,000.

    Source: BusinessReport


  21. Trustable Gold wrote:

    80% of surveyed executives of global gold mining companies expect the gold price to increase over the coming twelve months.

    Source: PWC Gold Price Survey 2012


  22. Chris wrote:

    The Canadian investor Eric Sprott has predicted a gold price above USD 2,000 in 2012. Based on the problems of MF Global he believes, (option for) physical delivery to become more important for investors.


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