Scenarios for and the gold price trends 2013

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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 March 2012 analysts surveyed by Bloomberg end of 2011 forecasted a level of US dollars 1,950.- per ounce of gold.

The French Bank BNP Paribas estimated in December 2012 gold to average US dollars 1,775 per ounce in 2012 and US dollars 2,150 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. The US-bank Morgan Stanley forecasted a price of US dollars 1,550 for 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 June 2012, Goldman Sachs updated its forecast on the gold price to US$ 1,940.- within the following 12 months, i.e. by mid of 2013. Barclays Capital expects a gold price of US$ 1,790.- in the fourth quarter of 2012, while Morgan Stanley now predicts gold prices to be on a level of US$ 2,000.- during that quarter.

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.

A moderate allocation to gold will therefore in the foreseeable future 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 spread of monies to different asset classes and investments, should remain an imperative for safety-orientated investors over the coming years.