UPDATE: 2012 gold price performance really disappoints readers and experts alike

Gold price predictions for 2012 at the beginning of the year from experts and non-experts alike have virtually all proved to be far too optimistic.

As the year draws to a close it would appear that very few of the more than 100 of you who entered this year’s Mineweb gold price competition have come anywhere near close to the reality. Mineweb readers are obviously, for the most part, a pretty bullish community as far as precious metals are concerned, and although in past years average predictions have actually been pretty good given the gold price’s good annual rises year on year, the yellow metal’s 2012 performance has not (barring a huge jump in the last week of the year) come up to readers’ expectations – or anywhere near.  With gold being marked down almost daily any big increase between now and December 31 seems highly unlikely.

To recap the average year-end gold price prediction from our competition entries from January this year was $1981 and the average gold price high prediction for the year $2202 – neither of which look as though will even come close. Definitely the worst reader performance since we started the competition four years ago.

However entrants shouldn’t be too despondent with regard to their performance. Even the experts have proved to be a little awry in their predictions this year. For example, the London Bullion Market Association, which also runs an annual gold price competition, saw this year’s average high across all its entries at $2,055. It doesn’t ask for a year end prediction. In the event that actual high for gold to date during the year was some $265 below this level – and somehow we don’t expect even this to be achieved between now and the year end, let alone the Mineweb readers’ prediction!

So what has happened this year which has made gold’s performance so much poorer than expected (with only around a 3.5% rise from its first January fixing of $1590 given the recent falls in the gold price). Some will put it down to some strange market dealings which seem to have been designed to drive the price down whenever it looked like taking off, while others ascribe it to a diminishing returns effect on bad economic news. There’s been so much bad news over the year that it no longer seems to have a significant impact.  Not even QE3 and QE4 in the U.S. caused any significant upwards move, unlike QE1 which drove prices hugely higher at the time.

The gold price moves on economic-based sentiment as much as, or more than, fundamentals. All the factors that have fuelled gold’s rise over the past 12 years remain with us – indeed are perhaps even more apparent today than they were at the beginning of the bull run. However it has to be said that the machinations in the market noted above, with every upwards move seemingly countered by massive gold futures selling at market dominating levels with huge numbers of contracts sold all at once, has indeed had the effect the sellers have been trying to achieve. That is to drive weak holders out of the gold market. Indeed the volatility so generated has probably opened the doors to the sellers being able to buy back at lower prices, see gold move up, and then repeat the cycle. Hardly an efficient market mechanism and one which is thus obviously open to significant manipulation by those with incredibly deep pockets. Perhaps not much different from bear raids on stocks seen in the markets – but moves that can only be initiated by institutions (a term used generally rather than specifically) with enormous capital backing.

What the motives are for the heavy COMEX selling are obviously open to interpretation which largely follows pre-conceived notions on market trading theory and practice. But whatever these are they have definitely been effective in subduing the gold bull market, which many analysts believe remains in place nonetheless. Indeed it appears that sales of physical gold and of gold ETFs have been relatively little affected so far suggesting this is moving into stronger hands who look mainly at the long term picture rather than in short term trading for profit. The big question is will these raids on the gold market come to an end – and if so, when?

This year the onset of the New Year saw a good pick up in the gold price after a weak December.  Gold bulls will be hoping that 2013 repeats the pattern.

P.S. The results of the 2012 Mineweb gold price competition will be announced in early January once the year-end price becomes known and the full year averages can be calculated.


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