LAWRIE WILLIAMS: The experts have spoken. Gold to average $1,311.71 this year!!

Every year the London Bullion Market Association (LBMA) invites a panel of ‘experts’ to participate in a competition to predict precious metals prices for the year ahead.  Because it is the most heavily traded, and because of its perceived significance in global finance, the gold price predictions take pride of place, although silver, platinum and palladium feature too.

Altogether some 30 professional analysts and precious metals specialists submitted their forecasts of how gold will perform this year, and the overall average was not particularly inspiring for gold bulls.  Precious metals analysts tend to be cautious in their forecasts, but in this writer’s view they were perhaps somewhat over-cautious in this year’s predictions with a combined average price forecast for gold at around the level it has already achieved in the first month of the year at $1,311.70.  In their defence the forecasts will have been made several weeks ago when precious metals prices were somewhat lower.  Their average forecasts for high, low and average prices are set out below, together with the LBMA’s comments on the forecasts for each individual metal, followed by the writer's own opinions.

Overall the LBMA notes that at first glance the headline averages do not appear particularly inspiring. However, the journey ahead to year-end makes much more interesting reading. Trading spreads across all four metals – gold $325, silver $7.25, platinum $430, and (particularly) palladium $815 – highlight the fact that analysts are in considerable disagreement on what may happen to prices in 2019. Whilst markets have factored in some of the downside risks of Brexit and the US-China trade war, other factors such the level of US real interest rates, strength/weakness of the dollar, the likely impact of geopolitical factors and the pace of global economic growth continues to provide some uncertainty.

LBMA PANEL FORECAST AVERAGES FOR 2019

However, the LBMA panel does not have a great track record when it comes to precious metals price highs, lows and averages despite the fact that the average scores across a panel of 30 experts should statistically be decently accurate in their forecasts.  This highlights the somewhat unpredictable nature of precious metals prices.  Last year as far as the key gold price was concerned the panel overall may well be accused as being too bullish predicting an average gold price of $1,318 against an actual figure of $1,268, although the competition winner, Citigroup’s Aakash Doshi, with a prediction of $1,270 did get pretty close.  This year though we think they are too bearish, at least as far as the gold price is concerned.

LBMA Panel Gold Price Predictions:

Average: $1,311.71 Range: $325 High: $1,475 Low: $1,150

Divided opinion for gold prices with the price forecast to trade in a range $1,150 to $1,475, but the overall average is forecast to deliver a modest increase of 1.8% over the year compared to the average price in the first half of January. However, a trading spread of $325 (25% of the forecast average price) suggests that the gold price could be in for an interesting journey in 2019.

Perhaps we can test out our own suggestions against the professionals’ averages.  We’d come up with an Average of around $1,350 High of $1,450. Low of $1,275, and for the record a year-end price of $1,425.  My colleague, Ross Norman, who is one of the LBMA’s panel , is predicting a gold price Average of $1,337, a High of $1,410 and a Low of $1,280.

Silver Price Predictions:

Average: $16.28 Range: $7.25 High : $20 Low : $12.75

A more bullish outlook is predicted for silver. With a trading range of $12.75 to $20 (44% of the average price), the overall consensus is that the average price of silver will end up somewhere in the middle at $16.28, a 4.2% increase on the average price in the first half of January.

Silver, the devil’s metal, is always hugely difficult to predict.  As I write the price is sitting at $15.90.  It has performed slightly better than gold during the latter’s recent advance with the gold:silver ratio (GSR) coming down from around 86 to 82.5.  Should gold perform as we expect then the GSR could come back to 70 which would suggest a High of around $20.70 and an average of perhaps $16.75 – slightly higher than the LBMA experts’ forecast, but close.  Ross’s predictions are Average:  $17.26, Low of $14.10 and a High of $18.55 suggesting a little more price consistency through the year, but perhaps at a higher level.

Platinum  Price Predictions:

Average: $850.71 Range: $430 High : $1,050 Low : $620

Platinum is forecast to be the best performing of the four metals, with analysts’ predicting an average price in 2019 of $850.71, 5.1% higher than the price in the opening half of January. However, prices are forecast to trade in a range of $430 (50% of the average price).

We think the forecast trading range is rather too high.  The writer is suggesting an Average price of $900 a high of perhaps a little over $1,000 and a low of $800.  We don’t expect the metal to fall back nearly as far as the expert analysts seem to be suggesting.  For the record, Ross’s predictions are Average $735, High $1,000, Low $620

Palladium Price Predictions:

Average: $1,267.68 Range: $815 High : $1,715 Low : $900

Analysts are forecasting for the second year running that palladium will be the worst-performing metal, with prices expected to fall 1.5% to an average price of $1,267.68 in 2019. However, with a wide trading range of $815 (nearly 65% of the average price) it could be a dramatic year in store for palladium.

The analysts were indeed very wrong here last year with palladium being comfortably the best performing precious metal in 2018 – indeed the only one to record a positive price performance over the calendar year.  The writer here is just about positive on the metal – the fundamentals look good – but anticipates that gold will re-exert its price dominance which leaves palladium at around  an average price of $1,300, perhaps a high of $1,500 and a low of $1,200.  Ross’s predictions: Average: $1,505, High $1,715, Low $1,261.  Ross is definitely more of a palladium bull than most and the fundamentals do support his view – but markets can be fickle.

30 Jan 2019

About the author

Lawrence Williams

Lawrence (Lawrie) Williams is a well known London-based writer and commentator on financial and political subjects, but specialising in precious metals news and commentary. He is a qualified and experienced mining engineer having graduated in mining engineering from The Royal School of Mines, a constituent college of Imperial College, London - recently described as the World’s No. 2 University (after MIT).

e: lawrie.williams@sharpspixley.com