forecast 2013 an overview - lbma · forecast contributors expect all four metals to increase in...

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Forecast 2013An Overview

are certainly less bullish than they were this time last year when they predicted a double digit price increase of more than 10% for 2012. And whilst last year was the 12th consecutive year in which the gold price has risen, it was the also the first year since 2007 not to record a new all time high.

Analysts are forecasting that the gold price will trade in the range $1,529 to $1,914, with an average price forecast of $1,753. Analysts argue that factors which could push the gold price towards the upper end of the range include the expansion of the US balance sheet through QE3, continued weakness in the US dollar, an expected increase in physical demand from China and India, muted growth in the supply of gold as well as an expected increase in net official sector purchases. On the downside analysts cite a strengthening of the dollar, an increase in global real interest rates and a reduction in physical demand, particularly from India and ETF funds, as factors which could push the price towards the bottom end of the range.

Analysts are predicting an increase in the price of all four metals in 2013. They are most bullish about the prospects for silver, citing limited supply growth coupled with increased industrial and investor demand, as positive factors helping to push up the price. They forecast that the average price in 2013 will be $33.21, 9.4% higher than the average price in the first week of 2013, with the price trading in the range between $26.20 and $39.75. Analysts warn that the price may also come under pressure from larger surplus of mine supplies and a downturn in the global economy.

Platinum has been dominated by disruption in supplies as a result of the industrial unrest in South Africa, which accounts for 75% of total world supply. This is expected to continue and together with continued growth in markets, such as China, mean that analysts are bullish about the prospects of platinum, forecasting an average price of $1,682; 6.8% above the average price in the first week of 2013.

The price of palladium is also expected to benefit from a negative impact on supply, in particular from a continued slowdown in sales from Russia, where stockpiles appear to be depleted. Analysts cite supply constraints coupled with increased industrial demand, particularly from the autocatalyst market, as factors which could see the average price in 2013 rise to $744, a $100 increase on the average price in 2012.

To find out more about what will happen to prices for precious metals this year, and what the factors are likely to affect their price, read the views of the experts. The tables for each metal follow, simply click on the names of the analysts to read their commentary.

Forecast contributors expect all four metals to increase in price during 2013 by at least 5%. Forecasters however, predict that continued uncertainties in the global economy mean that there could be significant volatility in the prices for all metals.

In comparison to the previous few years’ double digit performance, 2012 saw only a single digit rise of just over 4% in the price of gold. Analysts are expecting a similar increase in price during 2013, with the average price forecast to increase by 5.3% against the price in the first week of January 2013. Analysts

Metal

Gold

Silver

Platinum

Palladium

1st WeekJanuary 2013

(2nd-10th Jan incl)

$1,665

$30.36

$1,575

$689.64

Average2013

Forecast

$1,753

$33.21

$1,682

$744.03

2012Year

Average

$1,669

$31.15

$1,552

$644.33

2

$1

,30

0

$1

,20

0

$1

,40

0

$1

,50

0

$1

,60

0

$1

,70

0

$1

,80

0

$1

,90

0

$2

,00

0

$2

,10

0

$2

,20

0

$2

,30

0

$2

,40

0

$2

,50

0

$2

,60

0

Adams, William

Bhar, Robin

Brebner, Daniel

Cooper, Suki

Fertig, Peter

Hochreiter, Réne

Jollie, David

Kendall, Tom

Klapwijk, Philip

Kotecha, Mitul

Melek, Bart

Murenbeeld, Martin

Nagao, Eddie

Norman, Ross

Panizzutti, Frederic

Proettel, Thorsten

Rhodes, Jeffrey

Savant, Rohit

Steel, James

Teves, Joni

Tremblay, Anne-Laure

Vaidya, Bhargava

Zumpfe, Alexander

$2,020

$1,800

$2,000

$1,900

$1,975

$1,720

$2,000

$1,885

$2,002

$1,830

$2,012

$2,025

$1,800

$1,800

$1,880

$1,850

$1,925

$1,850

$1,950

$2,100

$2,000

$1,800

$1,895

$1,620

$1,400

$1,525

$1,540

$1,525

$1,480

$1,520

$1,545

$1,642

$1,500

$1,527

$1,475

$1,450

$1,550

$1,580

$1,620

$1,525

$1,450

$1,575

$1,575

$1,530

$1,515

$1,500

$1,765

$1,700

$1,860

$1,778

$1,775

$1,600

$1,785

$1,740

$1,847

$1,650

$1,895

$1,768

$1,600

$1,736

$1,753

$1,745

$1,727

$1,658

$1,760

$1,900

$1,865

$1,670

$1,751

HighName Low Average

$1,914 Averages $1,529 $1,753

Fastmarkets

Societe Generale

Deutsche Bank

Barclays Capital

QCR Quantitative Commodity Research Ltd

Allan Hochreiter (Pty) Ltd

Mitsui & Co Precious Metals

Credit Suisse Securities Europe (Ltd)

Thomson Reuters GFMS

Credit Agricole

TD Securities

DundeeWealth Economics

Sumitomo Corporation

Sharps Pixley Ltd

MKS (Switzerland) S.A.

LBBW

INTL Commodities

CPM Group

HSBC

UBS

BNP Paribas

BN Vaidya & Associates

Heraeus

Au $1,665 $1,753

1st week Jan2013

Forecast Avg2013

Average

HighLow

Click on the name of a contributor and it will take you direct to the supporting commentary

3

$5.0

0

$0.0

0

$10.0

0

$15.0

0

$20.0

0

$25.0

0

$30.0

0

$35.0

0

$40.0

0

$45.0

0

$50.0

0

$55.0

0

Adams, William

Bhar, Robin

Brebner, Daniel

Cooper, Suki

Fertig, Peter

Hochreiter, Réne

Jollie, David

Kendall, Tom

Klapwijk, Philip

Melek, Bart

Nagao, Eddie

Norman, Ross


Proettel, Thorsten

Rhodes, Jeffrey

Savant, Rohit

Steel, James

Teves, Joni


Vaidya, Bhargava

Zumpfe, Alexander

$45.00

$36.00

$45.00

$38.00

$37.50

$31.00

$43.00

$36.30

$43.40

$48.00

$34.00

$35.00

$39.00

$36.40

$50.25

$36.00

$37.00

$47.00

$45.00

$37.00

$35.00

$26.00

$26.00

$29.00

$25.50

$26.00

$23.00

$23.45

$27.90

$29.50

$26.00

$23.50

$26.00

$27.00

$29.00

$25.75

$26.00

$27.00

$26.00

$25.00

$23.50

$29.00

$33.30

$31.00

$37.00

$32.50

$33.25

$27.00

$31.85

$32.20

$35.60

$40.52

$28.25

$31.16

$34.00

$33.20

$36.25

$30.70

$32.00

$36.80

$39.05

$30.25

$31.50

Fastmarkets

Societe Generale

Deutsche Bank

Barclays Capital






TD Securities


Sharps Pixley Ltd


LBBW

INTL Commodities

CPM Group

HSBC

UBS

BNP Paribas


Heraeus

$60.0

0

$65.0

0

$70.0

0

Ag Average

HighLow$30.36

1st week Jan2013


$39.75 Averages $26.20 $33.21

$33.21

Forecast Avg2013


4

$1,1

00

$1,0

00

$1,2

00

$1,3

00

$1,4

00

$1,5

00

$1,6

00

$1,7

00

$1,8

00

$1,9

00

$2,0

00

$2,1

00

Adams, William

Bhar, Robin

Brebner, Daniel

Cooper, Suki

Fertig, Peter

Hochreiter, Réne

Jollie, David

Kendall, Tom

Klapwijk, Philip

Melek, Bart

Nagao, Eddie

Norman, Ross


Proettel, Thorsten

Savant, Rohit

Steel, James

Stevens, Glyn

Teves, Joni


Zumpfe, Alexander

$1,900

$1,900

$1,800

$1,840

$1,850

$1,675

$1,905

$1,870

$1,890

$1,950

$1,800

$1,895

$1,750

$1,790

$1,750

$1,875

$1,744

$1,875

$1,850

$2,000

$1,500

$1,500

$1,400

$1,390

$1,500

$1,475

$1,530

$1,495

$1,535

$1,510

$1,450

$1,545

$1,520

$1,410

$1,400

$1,525

$1,386

$1,500

$1,475

$1,550

$1,715

$1,688

$1,670

$1,690

$1,675

$1,575

$1,700

$1,695

$1,755

$1,844

$1,625

$1,711

$1,640

$1,670

$1,600

$1,710

$1,538

$1,740

$1,705

$1,690

Fastmarkets

Societe Generale

Deutsche Bank

Barclays Capital






TD Securities


Sharps Pixley Ltd


LBBW

CPM Group

HSBC

INTL Commodities

UBS

BNP Paribas

Heraeus

$2,2

00

$2,3

00

Pt Average

HighLow$1,575

1st week Jan2013


$1,845 Averages $1,480 $1,682

$1,682

Forecast Avg2013


5

$200

$100

$300

$400

$500

$600

$700

$800

$900

$1,0

00

$1,1

00

$1,2

00

Adams, William

Bhar, Robin

Brebner, Daniel

Cooper, Suki

Fertig, Peter

Hochreiter, Réne

Jollie, David

Kendall, Tom

Klapwijk, Philip

Melek, Bart

Nagao, Eddie

Norman, Ross


Proettel, Thorsten

Savant, Rohit

Steel, James

Stevens, Glyn

Teves, Joni


Zumpfe, Alexander

$900.00

$900.00

$850.00

$835.00

$840.00

$800.00

$835.00

$815.00

$875.00

$990.00

$900.00

$820.00

$810.00

$820.00

$850.00

$800.00

$782.00

$850.00

$940.00

$800.00

$600.00

$650.00

$625.00

$590.00

$625.00

$600.00

$590.00

$620.00

$646.00

$632.00

$550.00

$675.00

$630.00

$620.00

$560.00

$650.00

$576.00

$560.00

$600.00

$550.00

$765.00

$775.00

$715.00

$736.00

$737.50

$700.00

$745.00

$725.00

$753.00

$874.00

$725.00

$787.00

$740.00

$745.00

$682.00

$750.00

$666.00

$780.00

$780.00

$700.00

Fastmarkets

Societe Generale

Deutsche Bank

Barclays Capital






TD Securities


Sharps Pixley Ltd


LBBW

CPM Group

HSBC

INTL Commodities

UBS

BNP Paribas

Heraeus

$1,3

00

$1,4

00

Average

HighLow$689.64

1st week Jan2013


$850.60 Averages $607.45 $744.03

Pd $744.03

Forecast Avg2013


6

William ADAMSFastmarkets, Salisbury

Range: $1,620 - $2,020Average: $1,765

We remain bullish for gold as we feel creditors of US and EU debt (we are not so worried about Japanese debt) will become increasingly nervous about how the debt is managed. Will the debtors be tempted to debase the currencies in which the debt is denominated? In addition, we feel the legacy of all the quantitative easing that has been done could well stoke inflation once economic growth in the US and China gathers momentum, which we think we will start to see in 2013. Central banks, we feel, will be reluctant to tighten monetary policy in fear of stifling the recoveries and that may well mean inflation gets a head start. Overall, we feel with so much debt denominated in fiat currencies, creditors will want to reduce exposure to fiat paper in order to protect the value of their wealth.

W

Range: $26.00 - $45.00Average: $33.30

Generally, we feel silver will follow gold’s direction and it should also benefit from any pick-up in industrial activity. Our high price, if seen, is likely to happen in a spike higher in prices as, generally, we would expect good supply in the form of forward producer hedging, especially from producers of bi-product silver, in the $35 - $37 area. Given that we would not be surprised to see gold challenge the $2,000 area, we feel that it is bound to drag silver prices higher too – fundamentally, we would not expect prices to hold above $37 for any length of time.

W

Range: $1,500 - $1,900Average: $1,715

We are generally bullish for the PGMs on a supply stance as we fear there will be an escalation in labour unrest and resource nationalism in Southern Africa, especially in South Africa. With South Africa providing 75% of the world’s platinum, any lasting disruption could have a significant impact on supply. On the demand side, although we feel the global auto industry will see stronger growth in 2013, we feel platinum demand will not benefit to the full extent, as the European auto sales are likely to remain subdued and with their preference for diesel engine cars, that is likely to put platinum at a disadvantage.

W

Range: $600.00 - $900.00Average: $765.00

We are bullish for palladium from a supply point of view as we fear there will be further labour unrest in South Africa, and with the country supplying some 37% of palladium supply, that could have a big impact on the metals availability. In addition, slow sales from Russian stockpiles are likely to reduce supply further. On the demand side, we feel that palladium will benefit from stronger growth in demand for petrol engine cars in North America, China and other emerging markets.

Au Ag Pt Pd

Robin BHARSociété Générale CIB, London

Range: $1,400 - $1,800Average: $1,700

Gold will be underpinned by renewed fears of inflationary forces and currency volatility, while the US dollar is also expected to remain relatively weak on the back of QE3 and the possibility of other monetary tools designed to help offset any headwinds from fiscal consolidation. That said, we believe that much of these forces are priced into the market and that, while investors remain friendly towards gold, they are to some extent positioned accordingly. The official sector is expected to remain on the buy side, reflecting a continued desire for reserve diversification, helping to keep the future price decline reasonably gradual.

W

Range: $26.00 - $36.00Average: $31.00

Silver began developing support at $30 early in the fourth quarter of 2012 and we expect this to be largely sustained for much of 2013, as silver moves higher in sympathy with gold. With gold’s bull run drawing to a close this year, silver will also turn down and the $30 support is likely to come under pressure again during 2013. Investor buying and industrial demand growth, coupled with a stagnating supply side, should limit falls.

W

Range: $1,500 - $1,900Average: $1,688

The disruption in the South African mining sector will have long-term ramifications on the platinum market, where continued troubles are jeopardising both short-term output and longer-term production plans. Economic recovery (notably in the European automotive sector) will boost sentiment with respect to platinum’s prospects and potentially fuel a run towards a high of $1,900 in 2013.

W

Range: $650.00 - $900.00Average: $775.00

With the exception of 2011, when ETF sales pushed the residual market into surplus, palladium has been in a global deficit for more than 10 years overall. Over 10 million oz of Russian government stocks have been shipped into the market over the period, however, and have more than offset the deficit in the underlying market dynamics. We continue to believe that these shipments are in their final phase and see this as thrusting the market into a chronic deficit, which will support a renewed price rise over the longer term.

Au Ag Pt Pd

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7

Daniel BREBNERDeutsche Bank, London

Range: $1,525 - $2,000 Average: $1,860

Of course, gold cannot tarnish in the physical sense, but certainly from an investment perspective, our conviction for continued structural strength in the gold market is being tested. There are legitimate arguments being made with respect to an inflection in performance, reversing a 10+ year trend of appreciation.

Global investment demand for gold has moderated considerably over the past 18 months (down c. 16% year on year for Q3 2012), largely a function of the apparent success of central bankers in mitigating the risks associated with excessive financial leverage within the Western economic system. The strength in other more conventional assets, US equities for example, as economic conditions appear to normalise has also resulted in less urgency for investors to buy unorthodox investment instruments such as gold.

There is a growing conviction by many investors and analysts that the US dollar is likely to strengthen over the longer term. US energy independence is a key contributor to this theme. Certainly, a strong dollar would mitigate upside for gold in dollar terms. Finally, we note that the US Fed’s latest minutes suggest that there may be earlier-than-expected policy tightening. Several board members ”thought that it would probably be appropriate to slow or stop asset purchases well before the end of 2013, citing concerns about financial stability”.

Despite the issues highlighted above, we are not convinced that the Western economies have kicked their addiction to zero-cost funding, particularly given the importance of growth for this highly indebted region. On this basis, and given the likelihood that Chinese demand remains robust, we expect that gold should continue to appreciate over the course of the year.

W

Range: $29.00 - $45.00 Average: $37.00

Investor demand for silver has been disappointing over the past several quarters, with considerably less interest in the US. However, with strong coin sales since the beginning of the year, we expect that investment demand could improve in 2013. We expect that further economic recovery in the US and an acceleration of GDP growth in China could support silver industrial demand. We expect that gold to silver ratio to decline steadily from 55 to 50 this year.

W

Range: $1,400 - $1,800Average: $1,670

Our base case platinum supply-demand estimates suggest a net deficit of c.40koz. There are a number of risk factors which could push the market into a more significant deficit, the biggest of which is the potential closures coming out of an Amplats review.

W

Range: $625.00 - $850.00 Average: $715.00

For palladium, we expect the market to remain in a considerable deficit of c. 900koz this year.

Au Ag Pt Pd


8

Suki COOPERBarclays Capital, New York

Range: $1,540 - $1,900 Average: $1,778

Lack of conviction has tainted gold price action, and gold has struggled to establish its identity as a safe-haven asset, instead rallying amid a risk-on environment. The hurdles for gold are mounting from dollar strength to a softer physical market, but in our view, a number of positive macro catalysts still exist that could push prices significantly higher. Beyond central bank balance sheet expansion, uncertainty over the US debt ceiling vote and reduced risk premia in Europe should set a positive backdrop for gold. Furthermore, central bank buying continues, while gold held across physically backed ETPs remains close to record highs despite price corrections. However, this also poses the key risk to prices: should ETP flows turn negative, prices could tumble sharply. We retain a positive outlook on the market and continue to believe that rising market confidence, outperformance of alternative assets and rising real interest rates will dictate the turning point for prices, factors we do not expect to hinder gold in 2013.

W

Range: $25.50 - $38.00 Average: $32.50

Silver found little support from its fundamentals last year, and we expect lack of fundamental support to remain the theme in 2013. The market is set to deliver a wider surplus, as industrial demand has softened but mine supply grows unabated to set fresh record highs. Silver prices have been able to rally when industrial demand has been relatively firm, compounded by significant investment demand growth. Thus, given the fragile fabrication demand backdrop, investor interest has a much larger gap to plug. Should the gold market set a positive tone for trading, we believe silver investor interest has the scope to play catch-up and lead prices beyond the highs set in 2012. ETP holdings are below their peak, coin sales have recovered and speculative positioning has become more favourable. Given the dependence on non-fabrication demand, we expect silver prices to remain volatile and the least supported across the sector.

W

Range: $1,390 - $1,840Average: $1,690

Platinum found itself pulled and pushed by the escalation of supply disruptions in South Africa and tumbling European auto demand. But unlike in the previous year, the metal struggled to find meaningful support from its marginal cost of production. Given the soft demand conditions, particularly in Europe, we believe risks remain to the downside for platinum in the near term, but fundamentals are set to evolve constructively over the course of 2013. We expect the market to deliver a second year in deficit in 2013 after a sizeable deficit in 2012, but despite this, supply has not been constrained and inventory levels remain healthy, with consumers well hedged. Although this implies that additional supply cutbacks are required for prices to move higher, this would send unaffected output above the cost of production, in turn reducing the likelihood of voluntary cuts. In our view, prices will need a stimulant on the demand side to facilitate sustained gains, which we expect to materialise as inventory is run down and tighter auto emissions legislation is implemented.

W

Range: $590.00 - $835.00 Average: $736.00

In our view, palladium retains the strongest fundamentals across the precious metals and is set to deliver the widest deficit. However, we do not believe it will be plain sailing for palladium prices, given that the demand picture looks soft in the near term, with China’s palladium imports falling to the lowest level since February 2009. Although finished goods inventories have fallen, sustained growth in sales is required before palladium demand can recover later in the year. Indeed, we expect auto demand to continue to grow in key palladium consuming regions such as North America and China in 2013, providing a firmer footing for prices. On the supply side, Russian palladium shipments to Switzerland have also slowed significantly in 2012, and although not conclusive evidence of reduced state stock reserves, the trend is certainly supportive. Outside state stock releases, alongside platinum, palladium mine supply looks set to remain challenging, with the real scope for growth only stemming from recycling.

Au Ag Pt Pd

Peter FERTIG

Range: $1,525 - $1,975Average: $1,775

Sentiment among many analysts turned negative for gold in 2013. Also, large speculators reduce holdings of gold futures. This could drive gold down to test last year’s low. However, the reasons stated why gold should head lower are not convincing. Quantitative easing by the Fed is not a necessary condition for firmer gold prices. Also a rise of yields on longer-dated US Treasury notes and bonds would not be a rational reason to switch out of gold and into fixed nominal income assets. Higher yields will probably be the result of a stronger US economy. This should lead to an increase in investors’ risk appetite, which is favorable for gold. Furthermore, GDP growth in China accelerates again. The change of fiscal and monetary policy in Japan towards a 2% inflation target makes gold a more attractive investment for Asian investors. Thus, the average price of gold is expected to increase in 2013.

W

Range: $26.00 - $37.50Average: $33.25

Silver trades even more in line with other risky assets than gold. Thus, an improved economic outlook in major parts of the world should be supportive for silver. The Fed might end or at least slow down outright buying of US Treasury notes and mortgage-backed bonds as early as mid-2013. However, it is less likely that the thresholds for an end of the ultra accommodative monetary policy will already be met this year. Thus, the Fed Funds rate will probably be kept unchanged at the current level. In the eurozone, the ECB is expected to reduce the repo rate to 0.5%. However, the ECB is also determined to defend the euro. Thus, the euro might hold quite well against the US dollar or even firm slightly. Beside support from the US dollar, silver is expected to profit also from a positive development of stock markets. Furthermore, a global economic recovery could also lead to support for silver via firmer crude oil prices, which are another fundamental factor for silver.

W

Range: $1,500 - $1,850Average: $1,675

Labour unrests remain one of the risk factors for the PGMs on the supply side. However, even if mine production in South Africa were to return to the levels before the unrest broke out last year, the market is expected to remain in a supply deficit. The automotive industry in the eurozone is being hit hard by the fiscal austerity dictated by the troika of EU, ECB and IMF. However, the economic recovery in the US, China and other parts of Asia more than compensate for the woes of car manufacturers in Europe. Thus, platinum demand is expected to increase and to lead to higher prices.

W

Range: $625.00 - $840.00Average: $737.50

Palladium is expected to perform better than platinum in 2013. For the demand side, the factors mentioned earlier apply also. Palladium should also profit further from substitution process within the automobile sector. On the supply side, the supply from Russia is the crucial factor. Industry sources indicate that Russian inventories would decline and Russia would export less palladium. Thus, the supply deficit is expected to widen, which should lead to rising palladium prices this year.

Au Ag Pt Pd

QCR Quantitative Commodity Research Ltd, Hainburg


9

René HOCHREITER

Range: $1,480 - $1,720Average: $1,600

The gold price will likely soften over the year as world economies recover and the US dollar gains strength, the fiscal cliff will likely be avoided, and the recovering US economy will pull China and eventually Europe up behind it. In the fabrication sector, gold may lose some ground to platinum due to the latter metal’s more attractive price. Scrap recoveries may also increase as sellers take advantage of the high current prices.

W

Range: $23.00 - $31.00Average: $27.00

Silver will likely take its lead from gold and funds will respond algorithmically. Demand in most categories has been falling for a number of years; only the investment category has seen increased demand in the last three years. Should this category see liquidations in line with our thinking on gold, then the price will likely see a steep decline if declining demand in the industrial and jewellery categories fall further. Further falls in demand from photography and silverware sectors may exacerbate our negative price outlook.

W

Range: $1,475 - $1,675Average: $1,575

Platinum may follow the gold price initially, but the shortage of metal in the market resulting from the South African labour unrest in 2012 will likely take effect when the fabricators scramble to meet needs after the 2013 contract rollovers. This usually occurs in the first quarter of each year. There may be a dampening effect from the slow European recovery, but the price should move up towards that of gold, although it may not actually surpass the gold price in 2013 on average. It is now starting to trade less that $100/oz behind the gold price on a regular basis and we expect the gap to close over the course of 2013.New emissions legislation in 2013 to 2015 will show increased off-take in metal for the autocatalyst sector, especially as Euro VI comes in. Recycling will likely decline as the incentive to recycle is less, due to low current prices, and the investment and jewellery sectors should see good demand as a result.

W

Range: $600.00 - $800.00Average: $700.00

The palladium price is likely to remain flat even though the Russian stockpile appears to have been depleted. There is, apparently, a large amount of stock in the hands of funds and fabricators, which may need another four years to clear at current ‘de-stocking’ rates. Increasing consumption rates may materialise in 2013 as the non-European economies recover, but the available stocks will likely dampen any rapid upward movement.

Au Ag Pt Pd

David JOLLIEMitsui & Co Precious Metals Inc, London

Range: $1,520 - $2,000Average: $1,785

A developed world perspective on gold suggests that investors will have mixed motivations towards this metal in 2013. We feel that the euro will survive and that the global financial system’s health is slowly improving. This suggests that the insurance premium for gold will diminish. Despite recent noises from the Federal Reserve, we expect to see widespread use of unconventional monetary policy in many countries and continued low or negative real interest rates too. This should boost asset prices, possibly at the expense of a weak US dollar. However, inflation seems set to remain under control in the near term at least and other investments such as equities could be more attractive than during 2012. In the developing markets, Chinese demand should remain strong, but the Indian authorities seem set to intervene further in the gold market, to the detriment of demand. Overall, we remain bullish for gold but less so than we were last year and feel that $2,000 is currently a rather distant target.

W

Range: $23.45 - $43.00Average: $31.85

We are cautiously bullish over the prospects for the silver price. In our main scenario of rising gold prices, silver is likely to find some support and prices could firm. However, industrial and other manufacturing demand for silver continues to be weak and will improve only slowly in 2013, while mine production will rise. Investors will therefore have some serious work to do if they are to drive silver prices higher this year. They showed some appetite for this in the second half of 2012. Since we expect a stronger gold price this year, we feel that further investor interest in silver should be forthcoming once again and there are reasonable prospects of higher prices later in the year. However, we feel that the upside for silver prices is somewhat limited as investors may take profits and producers may choose to hedge their output if we approach $40/oz levels.

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Range: $1,530 - $1,905Average: $1,700

Despite all of the strikes, violence, closures and other problems affecting the platinum mining industry last year, soft demand meant that the platinum price performed rather unimpressively. We anticipate an improvement in economic conditions in 2013, which should boost demand despite a weak European car market. Further rationalisation can be expected in the mining sector in South Africa, but higher recovery of metal from end-of-life recycling and the huge impact of last year’s one-off disruptions mean that, overall, the platinum market is unlikely to be significantly tighter in 2013 than it was in 2012. This mildly positive fundamental picture could be enough to encourage investors, though: we believe they would generally like to be long of this metal if given enough reasons to be optimistic. A rising gold price is likely to provide one such reason and steady global economic growth could provide some additional price strength. The likelihood of a rebound in Chinese growth rates should also be positive for platinum demand and prices.

W

Range: $590.00 - $835.00Average: $745.00

The palladium price disappointed in 2012 despite the substantial fundamental deficit in this metal. Given the weighty oversupply in preceding years, continued deficits and an increased level of investor interest will be required to mop up this additional metal before the price truly starts to reflect the underlying fundamentals. It is, though, clear that the palladium market will be in deficit in 2013. Continued growth in global car production will drive demand higher, while supplies will remain constrained. Dwindling shipments of state-owned metal from Russia have convinced the market that this source of metal is much less important than before, and we do not foresee any return to higher levels of state sales. This should allow investors to assess palladium on a fundamental basis: we believe that this will attract investment interest and boost prices in the longer term. However, over the next 12 months, we foresee periods of price strength driving profit-taking from investors who already own palladium, limiting the rate at which the price will rise.

Au Ag Pt Pd

Allan Hochreiter (Pty) Ltd, Johannesburg


10

Tom KENDALLCredit Suisse Securities (Europe) Ltd, London

Range: $1,545 - $1,885Average: $1,740

The 12-year-old US dollar gold bull market is not in the best of health: 2012 was a frequently trying year for gold traders and investors, and we think 2013 will bring further prolonged periods of range trading in a low implied volatility environment.

Our central macroeconomic case is that the acute phase of the global crisis is probably over and that there will be a slow improvement in global growth through the second half of the year. If this proves to be correct then the relative appeal of gold is likely to diminish as fear trades fade. Consequently, we think the current gold cycle is likely to peak this year (on a quarterly average price basis – we have probably already seen the absolute high in US dollars).

Prior to that, however, a resumption of Treasury purchases by the US Federal Reserve and a battle over tax and spending plans in the US in late February/early March are expected to drive gold higher.

Physical demand from China and India is also expected to improve, although there is a risk that the Indian government may introduce fresh policy measures to restrict bullion imports in the 2013/14 budget.

Gold will continue to have a role in portfolios that seek diversification and long-term inflation protection, and central banks will remain net buyers of the metal in our view, but an increasing number of investors are likely to switch their attention elsewhere this year. One manifestation of that is that we expect platinum to regain its historical premium to gold.

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Range: $27.90 - $36.30Average: $32.20

Silver’s reputation as a defensive asset was damaged by the price’s 40% collapse and spike in volatility during the final months of 2011. The price action since then suggests its image remains somewhat tarnished.

Fundamentally, the prospects for silver are solid: industrial demand should pick up as global growth accelerates, aided in no small part by ambitious Chinese targets for new solar power-generating capacity. That should help absorb some of the expansion in mine supply that we expect from both primary and by-product sources. But continued purchasing by investors is required to keep the price so far above its long-term historical mean.

The net result this year is likely to be a largely range-bound price: we do not expect silver to trade above $40/oz this year, nor much below $28/oz.

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Range: $1,495 - $1,870Average: $1,695

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Range: $620.00 - $815.00Average: $725.00Au Ag Pt Pd

We retain our bullish structural view for both platinum and palladium, and expect the latter to moderately outperform over the course of the year. We also prefer both main PGMs to gold, and by the end of this year, we expect platinum to be trading consistently at a premium to gold.

In the near term, however, we are cautious about the price prospects for both metals, particularly palladium. Hedge funds have recently been noted buyers, both through the back end of last year and again in early January, anticipating further supply-side cuts and improving demand. So in the short term, positioning and price may well have overrun the fundamentals. There is a risk that if Anglo American Platinum’s strategic review ‘disappoints’ the market, prices could see a sharp correction, albeit one that we would expect to dissipate rapidly.

Industrial and jewellery demand for PGMs was sluggish through most of the fourth quarter of last year, and we think large automotive users of the metal are, in general, still well hedged for the next three to six months. In addition, supply from South Africa should increase sequentially in the first quarter of this year as productivity continues to recover from the strikes of last year, while holders of scrap are expected increasingly to liquidate inventories as prices rise. Consequently, we expect both markets to tighten only slowly in the near term and for price performance to be stronger in the second half of this year than the first.


11

Philip KLAPWIJKThomson Reuters GFMS, Hong Kong

Range: $1,642 - $2,002Average: $1,847

At the time of writing, gold’s recent lacklustre price performance together with an excessively bearish interpretation of the latest FOMC minutes have depressed sentiment towards the yellow metal. It may be, though, that the market is overreacting and that gold will surprise to the upside in 2013. First, looking at the metal’s supply/demand fundamentals, these may actually improve a little or at least not deteriorate any further. Supply growth will, at best, be very modest, with only a marginal gain in mine production expected and scrap is set to fall unless prices are a good deal higher. Fabrication should be supported by a better tone to the Chinese economy this year and a rebound in Indian demand from 2012’s especially weak performance. In short, at anything close to prevailing gold prices, the ‘surplus’ in the market is unlikely to grow and may even contract somewhat. Second, economic conditions will encourage a high level of net bullion purchases from both the official sector and investors. As regards the former, risks would seem to be stacked to the upside in terms of the scope for gold purchases as a means of reserves diversification. Particularly important in terms of the outlook for investment this year is that there is no scope for short-term interest rate rises in any of the three major currency blocs. Indeed, further loosening of monetary policy is probable, especially in Japan. And, on the fiscal front, progress in reducing deficits will be slow and government debt ratios will rise to levels that in the case of the United States should see it lose its AAA status. The market is far too sanguine about the longer-run implications of that likely development. Gold will be a major beneficiary.

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Range: $29.50 - $43.40Average: $35.60

2013 ought to see silver recover further from its post-2011 bubble hangover and, before the year is out, trade into the low $40s. An important plank in this argument is that silver will outperform gold on the latter’s move higher. This expectation should foster increased speculative demand for the white metal. (Indeed, a narrowing of the silver:gold ratio from the current 55:1 to comfortably below 50:1 is probable if prices rise as forecast.) Other positives will be little or no supply growth, as the multi-year rise in global mine production stalls, and a fair improvement in industrial demand, with the latter assisted by the fact that manufacturers’ inventory levels are thought to be fairly low at the beginning of this year.

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Range: $1,535 - $1,890Average $1,755

Although benefiting from gold’s positive outlook, the decent recovery in platinum prices forecast here is largely dependent on concrete steps being taken during the course of 2013 to close down permanently loss-making South African mine production. This will eventually provide the conditions for the platinum market to shift from gross surplus to gross deficit. In the absence of such an expected move from producers in South Africa, the scope for price appreciation this year would be severely constrained by the generally limited prospects for fabrication demand growth. Specifically, in spite of a growing but limited contribution from HDD, autocatalyst demand will remain bogged down by the key European diesel car market remaining depressed. In addition, while expected growth in Chinese jewellery consumption is not without significance, it is unlikely to be enough on its own to change radically the overall platinum supply/demand balance.

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Range: $646.00 - $875.00Average $753.00

Palladium is the only one of the four major precious metals currently in a gross deficit and this gap between supply and fabrication demand should be broadly sustained in 2013. First, the impact of supply growth from autocatalyst recycling may be partly offset by any long-term cuts to South African mine production capacity being initiated this year. Second, autocatalyst demand for palladium will rise, albeit more slowly than it did in 2012, due to a further advance in global gasoline-powered light vehicle output and further substitution from platinum to palladium, especially in diesel powered light vehicles. These solid fundamentals coupled with rising prices should encourage speculative interest in palladium, driving up prices further. And, in addition, Russian State stock sales are expected to diminish further. A vital question then is, at what point do long-standing holders of palladium bullion stocks decide to sell these and take profits? The answer to that conundrum could well emerge during the course of 2013.

Au Ag Pt Pd

Mitul KOTECHACredit Agricole, Hong Kong

Range: $1,500 - $1,830Average: $1,650

The path of gold prices will hinge in part on the stance of central banks in two ways. Firstly, continued balance sheet expansion and currency debasement will imply that gold prices remain supported. Secondly, despite the slower pace compared to past

quarters, official sector purchases will still provide a floor to gold prices, especially as they diversify from the dollar and euro. Emerging economies, particularly China and India, will also play an important role in gold demand given the expected pick-up in growth

in these countries. Given the robust negative relationship between gold prices and US Treasury yields, and our expectations that US Treasury yields will rise in coming months, we look for a gradual decline in gold prices. Assuming that the usual

relationship between gold prices and risk aversion reasserts itself, we expect a trend of improving risk appetite to weigh on gold prices into 2013.

Au


12

Bart MELEKTD Securities, Toronto

Range: $1,527 - $2,012Average: $1,895

While we agree that the eventual reversal of the Fed’s ultra accommodative monetary stance will sufficiently impact investment demand to depress gold prices, it is too early to react to this possibility through much of 2013. The economic environment around the world and in the US is still quite poor, implying a greater chance that central banks around the world, including the Fed, are likely to ease policy further.

The Fed’s $85 billion/month QE programme throughout the year should prevent the yield curve from steepening too much, keeping the opportunity cost of holding gold low. New targeting of higher implied and actual inflation levels by some major central banks, and massive and rising balance sheet positions, along with rising inflation expectations, should help to keep investment demand strong.

Meanwhile, central banks look set to use gold again as a way to diversify their FX reserves, likely buying another 500 tonnes in 2013. Growing activity on the Shanghai Gold Exchange, stronger fabrication activity demand resulting from improving global economic conditions and relatively muted supply growth are another set of factors that make us believe gold should perform very well in 2013.

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Range: $26.00 - $48.00Average: $40.52

Silver should be a top-performing precious metal in 2013. Like gold, it looks set to benefit from its quasi-money properties and the global macroeconomic trends. In addition, silver prices are projected to be supported by tighter supply/demand fundamentals as industrial/investor demand outpaces the increase in global supply growth. TD Securities expects this metal to be very near a deficit through the balance of the year, with a considerable risk of a shortage. Given the metal’s higher volatility, it should outperform gold with a price materially above $44/oz when it reaches its late-2013 highs.

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Range: $1,510 - $1,950Average: $1,844

The current platinum price of around $1,600/oz is set to jump higher in 2013. The price needs to rise materially in order to provide incentives to build new mines, particularly in South Africa, where recently higher currency and higher wages are pushing the cost structure higher. Meanwhile, perceived higher country risk is forcing higher discounts on cash flows originating in South Africa, implying the need for higher nominal earnings for any given operation, which implies higher per unit clearing price on the margin.

According to the TDS supply/demand model, it looks like the platinum market may end up in a very significant deficit of some 400 koz in both 2013 and 2014. This is due to poor growth prospects for the South African mining sector and the loss of some 600 koz of production in the country throughout 2012.

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Range: $632.00 - $990.00Average: $874.00

Curtailed Russian and South African supply, high production costs and better demand are projected to lift palladium sharply higher towards the latter part of 2013. The expectations of an increasingly tight market in 2013, and for many years to come, is the biggest factor behind our optimism. This has already attracted greater speculative and investor interest recently, which has helped to place palladium prices on a higher trajectory, following a lacklustre performance for much of 2011. Given improved autocatalyst demand in the US, China and across the globe, and higher industrial/fabrication use in 2013, along with supply side constraints, the palladium deficit looks set to be quite deep over the next several years. As such, the price increase could be considerable as this market may need to clear in ‘auction’ price territory (above the cost curve).

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Martin MURENBEELDDundeeWealth Economics, Victoria

Range: $1,475 - $2,025 Average: $1,768

We thought 2012 would prove to be a difficult year for forecasters, and it certainly proved to be such a year for us. We forecast correctly that 2012 would, somewhat like 2008, be a contest between “recession/slow growth” and monetary “reflation”. But we bet that reflation, in response to a likely ‘Grexit’ – eurozone downsizing – and further financial problems around the world, would win the day for gold. We were wrong; gold went more or less sideways on the back of only modest increases in global liquidity, instead of averaging $1,835 as forecast.

2013 could see a similar pattern unfold, with recession/slow growth/disinflation pulling gold downwards and monetary reflation (i.e. the Fed’s QE of $85 billion/month) no more than managing to keep gold prices stable. Because we have raised the probability of a sideways pattern for gold, our forecast has come down modestly from that of last year.

Fundamentally, however, not much has changed in the outlook – other than the likelihood of a eurozone breakup in 2013 appears to have declined. But

Draghi/ECB will have to make good on the “we’ll do whatever it takes” promise in 2013, which together with an increase of $1 trillion in the Fed’s balance sheet in 2013 and more QE from the Bank of Japan, should help our global liquidity measures and push gold prices somewhat higher.

Other positive factors include continued central bank purchases of gold, ongoing investment demand, the quiet transformation of gold into an acceptable financial asset once again, strong consumer demand in China to help offset some

further possible (policy-induced) deterioration of gold demand in India, and the rather tepid increases in new mine supply.

The major negative factors include weak growth and disinflation tendencies around the world. But it is precisely these factors that preclude central banks adopting monetary policy ‘exit strategies’ in 2013.

Au


13

Eddie NAGAOSumitomo Corporation, Tokyo

Range: $1,450 - $1,800Average $1,600

We expect continued political upheavals, especially in countries that have just faced or will face a change of leadership, to push gold up to the year’s high in Q1, if not Q2. However, in the second half of the year, we expect the global economy to stabilise, led especially by the US and China, and this will stimulate investors to change their asset allocations. In particular, a rise in real US interest rates will prompt a shift of money from gold and silver to industrial commodities, equities and real estate, where higher returns can be expected.

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Range: $23.50 - $34.00Average $28.25

Silver will basically move in line with gold. We may see a little further push to the downside in the white metal for two reasons: 1) there is no central bank buying to support the silver price; and 2) a higher portion of ‘flight investment’ from the US has been for silver rather than gold. As for industrial demand, the solar cell industry will recover for sure, but a lot of technology is shifting to thin film from thick film.

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Range: $1,450 - $1,800Average $1,625

We expect the platinum price to overtake the gold price in 2013. On the demand side, this will be driven partly by a further recovery in the global economy, but we also anticipate more investment demand for physical platinum in 2013. On the supply side, there are still concerns as 75% of supply comes from South Africa.

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Range: $550.00 - $900.00Average $725.00

Around 35% of global palladium demand needs to be met from recycling and stock drawdowns. Russian state stocks are presumed to be nearly exhausted, and Russian ore grades are reducing. This will leave the palladium market increasingly reliant on South Africa, where the mining industry is struggling severely with cost increases and labour disputes. On the demand side, we expect a recovery in the auto sector and a further shift from platinum to palladium in autocatalysts.

Au Ag Pt Pd

Ross NORMANSharps Pixley Ltd, London

Range: $1,550 - $1,800Average: $1,736

We see the long-term gold bull run remaining very much intact, but the conviction and patience of gold investors may be tested in 2013. Against the backdrop of an improving macroeconomic environment, particularly in the US, we see dollar firmness and a fading of the fear trade providing a drag on rising gold prices. For a market used to a 17% year-on-year gain, a single-digit percentage increase may feel like a bear market. In essence, we see 2013 looking surprisingly like 2012 – that is modest price gains, declining volatility and extended periods of range trading. The caveat to this is the US debt ceiling issue, which arises in March 2013 – a fudged outcome could of course generate far higher outcomes than shown above. The key issues will be ongoing central bank purchases and growth in investment demand, this being partially offset by a reduction in speculator positions and moderately lower Indian demand as import duties are raised again. Broadly speaking though, gold will continue to be seen as cheap insurance for those concerned with tail risk and is a high-quality asset that holds value amidst competitive devaluations of currencies.

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Range: $26.00 - $35.00Average: $31.16

We expect some softness in silver prices during 2013, which after a stellar 10-year run, looks vulnerable as the fear trade evaporates and speculators look to reduce their positions commensurately. Silver has consistently been the top performer within the commodity complex but is looking increasing like an aging rock star – a little past its best. We forecast a weak start to the year on US dollar firmness before good demand from industrial applications as global IP picks up, coupled with re-stocking in the second half. With its recent history of price spikes, there is a danger that sharp rises will be seized upon by producers as an opportunity to sell forward, effectively capping the rallies. With primary mine production continuing to rise to new record highs, the onus is increasingly on the silver bulls to prove the case.

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Range: $1,545 - $1,895Average: $1,711

The prospect of further supply-side disruptions from South Africa from the unions, coupled with ongoing robust demand from the auto sector, looks likely to ensure that platinum prices remain firm in 2013. If, as expected, a number of South African mines go onto care and maintenance then this could potentially exacerbate supply tightness further. With an improving economic backdrop giving rise to higher global IP – and in particular the growth in HDD catalyst demand for commercial vehicles – this gives scope for strong demand in a supply-constrained market, setting the scene for potentially far higher prices than those that we have forecast here.

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Range: $675.00 - $820.00Average: $787.00

We expect palladium to move into a supply deficit of about 450,000 ozs in 2013 as production is mothballed in South Africa, which should ensure that prices remain firm in 2013. As such, we anticipate that palladium will be the best-performing commodity in the year ahead. The key issue determining the palladium price outlook, as always, will be the perennial question over Russian metal sales from stocks and from production. In the case of the former, we think that the stockpile is already much depleted and, for the latter, given that margins are already slim, there is a distinct chance that Russian metal may be withheld from the market. As with platinum, the price risk is very much to the upside as high production costs have placed a floor under this market.

Au Ag Pt Pd


14

Frederic PANIZZUTTIMKS (Switzerland) S.A., Geneva

Range: $1,580 - $1,880Average: $1,753

On 31 December 2012, gold closed at $1,664.00/oz, about 4.6% higher than the opening price on 2 January 2013, and traded in a $254/oz range. Compared to the previous few years’ double-digit performance, 2012 resulted in a significant slowdown. 2013 is likely to have another single-digit performance. While we still are in a bull trend, we expect the upside momentum to slow down, with the market entering a ‘consolidation’ phase. The significant accumulation of physical gold over the last three years, due to portfolio diversification/protection aiming to reduce credit risk, is likely to slightly slow down in the coming few months as the global economic crisis seems to be more or less contained.

Possible signs of growth and inflation in Q4 seem likely. Negative real interest rates and monetary generosity in the USA and EU, fiscal austerity, as well as a cautious attitude toward credit risk-taking are some of the factors that should help gold to gradually move higher over the course of the year. We expect some shift of physical from the West to East in the coming months on the expectation that major Asian currencies will strengthen, resulting in more buying interest from this region, both by the private and official sectors. This could result in higher volatility and interesting gold price action.

Ultimately, all fundamentals remain positive for gold and we expect the yellow metal to again trade over $1,800/oz.

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Range: $27.00 - $39.00Average: $34.00

Silver closed $1.17/oz or 4 % higher at 29.95, after having traded in a wide range of $10.5 throughout the year; a performance very much in line with gold. As we don’t expect any significant increase in physical demand, we remain, as in the past years, just marginally bullish.

In our opinion, silver will trade in line with gold. Possible speculative interest could, from time to time, motivate silver to temporarily decorrelate from gold. As in past years, the level in demand from China will remain a prevailing and key driving factor for the silver price in 2013.

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Range: $1,520 - $1,750Average: $1,640

Both white metals have performed well last year despite the subdued global growth. Platinum closed 8.16% higher at the end of 2012. The major strikes experienced in 2012 and the resulting disruption in metal extraction caused a temporary imbalance in the markets. More strikes remain possible in 2013 but probably on a reduced scale.Increased investors buying interest on the back of more diversified ‘precious metals’ portfolios could be one the factors contributing to the upside trend in 2013. The expectation of a recovery in global growth in Q4 2013 could result in a renewed increase in industrial demand.

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Range: $630.00 - $810.00Average: $740.00

Another year of decent performance for palladium (+6.91%), with a close at $699.0)/oz on 31 December 2012. In 2013, greater industrial demand in PGMs can be expected on the back of a global recovery. Industrial growth during the last quarter of 2012, especially from the automotive industry, should support the palladium uptrend over the year ahead.

Despite its industrial character, we had expected more speculative interest and action in palladium to add some volatility and to gradually push the metal higher.

Au Ag Pt Pd


15

Thorsten PROETTELLandesbank Baden-Wurttemberg (LBBW), Stuttgart

Range: $1,620 - $1,850Average: $1,745

Last year was the 12th consecutive year with a positive gold price performance, but the first year since 2007 without new all-time high.

Different factors led to this result and they will further influence the gold price in 2013. As a well-known fact, the economic crisis increased the investment demand, which pushed gold prices higher. But after a surge in 2008, 2009 and 2010, gold demand in Western markets decreased considerably due to saturation. Last year, ETC demand, as well as physical investment demand, reached lower 2007 levels and I expect them not to resurge in 2013.

On the other hand, the price is well supported by low interest rates in all major currency areas, a situation which may not change until 2014.

Furthermore, accelerating economic growth in China will spur gold demand in the biggest market besides India.

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Range: $29.00 - $36.40Average: $33.20

Still influenced by the price bubble from late 2010/early 2011, silver was settling during the last months. I expect that silver will tend to the upper half of the 2012 price range as modest economic growth in all major markets except the eurozone will increase industrial demand. Decreasing ore grades in some countries signal that mining might swing to a lower growth path in 2013, which may increase the price, too.

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Range: $1,410 - $1,790Average: $1,670

Low demand for diesel engines, as well as ongoing efforts to substitute platinum with cheaper palladium in catalysts for gasoline engines, are two ingredients that would not indicate higher platinum prices in 2013. But the critical factor in this market is the supply side, as wildcat strikes in South Africa proved last year. I expect furthermore constrained supply from South Africa and Russia this year, which should result in somewhat higher prices.

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Range: $620.00 - $820.00Average: $745

Last year, palladium demand in the car industry was twice as high as platinum demand, while in 2006, use of both metals was almost equal. This trend will proceed. Investors and industry should also consider that the concentration of palladium mining in Russia and South Africa could lead to constrained supply, which has the potential to spur prices.

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Jeffrey RHODESINTL Commodities, Dubai

Range: $1,525 - $1,925Average: $1,727

Perhaps the most striking feature of 2012 was the sharply reduced level of price volatility across the whole precious metals complex. The record-breaking march of gold upwards had seen the yellow metal post a series of all-time highs in 2011, which culminated in a record price of $1,920 and a trading range between the high and low point of $610 or 46%. However, 2012 proved to be much less dramatic as the prevailing universal bullishness dissipated and gold settled into a period of quiet consolidation within a relatively narrow trading range of $268 or 18% between the year’s high of $1,795 and low of $1,527. Although some will be disappointed with gold’s performance last year, it still managed to post a

year-on-year gain of 7%, with an increase in the annual average price of $6%, matching the gains posted in the DJIA. The fact that gold’s annual rate of capital gain last year was well below the annual average increase of 18% since the bull market started in 2001 has prompted some long-lost bears to emerge from the woods. But I remain firmly in the other corner and view 2012 as a year of solid consolidation, with the base line of support being raised to $1,500, providing a platform for another positive year for gold. However, with $1,800 now providing a stiff overhead technical barrier that could prove tough to penetrate, and gold ‘out of the headlines’, we could well be in for another year of reduced volatility with the price largely contained

within these parameters. Nevertheless, in my view, any break outside of this range is likely on the upside as private investors keep their trust in gold to build on the 2,380 tons ($126.4 billion) of ETF holdings already accumulated, and non-Western central banks continue to diversify their dollar holdings into the yellow metal. With the plunge over the fiscal cliff in the US only temporarily averted; the problems in the eurozone deferred but not resolved, and the uncertain global economic outlook likely to keep interest rates in the West close to zero, the search for yield goes on and will keep gold centre stage as an attractive asset class for money managers.

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Range: $25.75 - $50.25Average: $36.25

The gloomy state of the global economy that prevailed for much of 2012 took its toll on industrial demand and silver posted a decline of just under 12% in its average price, although year on year, it managed to end with an encouraging 9% gain. Given the fact that the ‘industrial precious metal’ appears to be underpinned by strong technical support at $26, and my view on gold is mildly bullish, I would now expect silver (as a cheap safe-haven proxy for the yellow metal) to probe the key area of resistance on the charts located between $35 and $38 in 2013, with a clear break having silver bugs (including me) talking once again about a price north of $50.

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16

Rohit SAVANTCPM Group, New York

Range: $1,450 - $1,850Average: $1,658

Gold prices are expected to remain at historically elevated levels during 2013, but are unlikely to reach record high levels during the year. Investors still see many reasons to hold at least some portion of their wealth in gold, but they do not intend to chase the price higher. The lack of urgency results from the fact that many of the problems that are cited as reasons to purchase gold – such as the debt and deficit issues of governments around the world, the weakening of major currencies and monetary accommodation by central banks – are already factored into the price. These are structural issues that are expected to take years to be resolved, and it is becoming increasingly clear to investors that the doomsday predictions related to these issues are unlikely to materialise. Investors thus continue to add gold to their long-term portfolios against long-term economic difficulties, but they have become more price sensitive. Central banks are expected to continue buying gold to diversify their large foreign exchange reserves, which should underpin prices.

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Range: $26.00 - $36.00 Average: $30.70

Silver market investors are expected to remain price sensitive during 2013, adding metal to their holdings on price declines and holding back from making purchases when prices rise. This is expected to keep silver range-bound during the year. Silver prices are forecast to move in a range between $26 and $36 during 2013. Global economic growth is expected to improve during 2013, compared to 2012, albeit at a sluggish pace. This improvement in global economic growth is expected to help increase demand for the metal in industrial uses, which is expected to be supportive of prices. Jewellery demand is also expected to rise as consumers get accustomed to high silver prices.

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Range: $1,400 - $1,750Average: $1,600

Platinum prices are expected to improve in 2013 compared with 2012 as global economic growth shows relative strength. Platinum has a multitude of industrial applications that would benefit from a strengthening in economic growth. Expectations that European economic growth will improve during the second half of the year could help revive the European auto market, which sells cars with platinum-intensive catalysts. The relatively lower price of platinum compared with gold is also expected to help boost demand for the metal from the jewellery sector. Structural problems in the South African platinum mining industry are expected to continue underpinning platinum prices.

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Range: $560.00 - $850.00Average: $682.00

Palladium prices are expected to rise in 2013. An increase in fabrication demand coupled with potential for losses in mine supply is expected to drive investors toward this market, driving higher the price of the metal. An improvement in global economic growth is expected to increase demand from autocatalysts and from the semiconductor industry. Continued substitution of platinum with palladium in diesel autocatalysts should further aid growth in palladium fabrication demand.

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James STEELHSBC, New York

Range: $1,575 - $1,950Average: $1,760

Gold should derive support from ongoing accommodative monetary policies by the US Federal Reserve and other central banks. Even investors who believe QE policies will be ineffective may be attracted to gold as an inflation hedge of as a quality asset. A modestly stronger euro in 2013, based on HSBC currency research forecasts, would also likely buoy gold. After a weak 2012, Indian consumption should partially recover based on historical consumption patterns and we anticipate strong Chinese import demand. Scrap supplies, while ample, are unlikely to rise at current price levels. Mine supply is likely to grow moderately, but we do not believe the marginal increase in output will be sufficient to deter a rally. The official sector is likely to be a strong source of demand in 2013, as emerging market central banks are likely to keep accumulating gold as one strategy to diversify their foreign exchange holdings.

W

Range: $27.00 - $37.00Average: $32.00

After weakening in 2012, we are moderately bullish on silver prices this year due to a recovery in manufacturing demand, based on HSBC forecasts of industrial production. We expect retail investment demand for coins and small bars to improve this year but to remain volatile. We anticipate silver exchange traded fund demand to grow further in 2013 as uncertain economic conditions make it likely that investors will seek out hard assets, including silver. Robust mine supply increases are likely, based on production schedules, and should help limit rallies, we believe. Silver may also benefit from limited scope for scrap supply increases.

W

Range: $1,525 - $1,875Average: $1,710

We expect platinum to rally this year due principally to supply tightness. South African mine supply growth is limited due to a range of factors, notably industrial, safety-related and technical work stoppages, falling ore grades and rising costs. Based on costs in local currency terms, higher prices are required to increase platinum production longer term. Russian output may also decline, based on lower ore grades. Global auto demand should increase, but this will probably be offset by an increase in auto scrap recycling. Industrial demand should rise sufficiently to raise demand and outstrip the ability of mining output to keep pace. Platinum’s widespread and unique applications in many industrial and technological processes make it relatively price inelastic. Low prices may allow platinum jewellery to win market share from gold, notably in China. Investors seeking hard assets may also target platinum.

W

Range: $576.00 - $782.00Average: $666.00

Supply tightness should also help rally palladium prices in 2013. The outlook for Russian production is unenthusiastic due to limited nickel output from which it is derived as a by-product. Similarly, South African output increases will be limited by platinum production. The likelihood of diminishing Russian stockpile exports, due to dwindling stocks, argues for higher prices and is an important component in our bullish outlook. As with platinum, palladium demand should benefit from any growth in auto and industrial demand, but the popularity of gasoline-fired engines in vehicles produced for the North American and emerging markets is positive for palladium as these vehicles rely primarily on palladium-heavy autocatalysts and use proportionately far more palladium than diesel-fueled vehicles. The investment demand for palladium could be stimulated by concerns over Russian stockpile declines.

Au Ag Pt Pd


17

Glyn STEVENSINTL Commodities, London

W

Range: $1,386 - $1,744Average: $1,538

Range: $576.00 - $782.00Average: $666.00Pt Pd

Joni TEVESUBS, London

Range: $1,575 - $2,100Average: $1,900

We remain gold bulls. Ongoing uncertainty around US fiscal issues, together with the view that major central banks will maintain loose monetary policies for longer, are key supports of our outlook. The avoidance of the fiscal cliff and expected back-loading of spending cuts are positive for gold: 1) to the extent that the dollar weakens on disappointment from those who are hoping for more fiscal restraint, and 2) given the likelihood this will lead to a US downgrade. Continued Fed balance sheet expansion amid subdued growth plus the ECB’s OMT plus further easing by Bank of Japan are all gold price-supportive. A weaker Japanese yen outlook also means that traditional flight-to-quality flows could be redirected to gold. While physical demand may remain sluggish, official sector buying and demand from more strategic, quality investors will compensate.

W

Range: $26.00 - $47.00Average: $36.80

Silver is set to outperform in the current accommodative policy environment, especially as risk sentiment remains generally buoyant. Barring any major risk-off event, we expect this trend to continue in 2013 against the backdrop of persistent QE from the Fed and loose monetary policy from other key central banks. In terms of day-to-day direction, though, silver lacks its own internal drivers and should continue to look to gold for guidance. On the fundamental side, we are estimating a small recovery in demand next year, but the risks remain to the downside given an ongoing subdued global growth environment. Despite downside risks to fundamental demand, it is ultimately investor appetite that drives silver’s price action. The price is therefore likely to be more buoyant than what may be suggested by supply and demand fundamentals.

W

Range: $1,500 - $1,875Average: $1,740

Implications of South Africa’s strike in the second half of 2012, the threat of further supply issues and potential restructuring of unprofitable mines raise platinum’s price floor and provide upside risks in 2013. Mine supply this year is expected to be broadly unchanged, and remaining constrained further out. The threat of more illegal strike action looms large and the bi-annual wage negotiation season in Q2/Q3 offers significant risks. A better 2013 growth story, albeit still subdued, should support auto and industrial demand growth. The introduction of Euro 6 for HDD this year, and for light-duty diesel in 2014, will help compensate for ongoing weakness in European auto sales. The rate of autocat recycling is a swing factor worth watching. Unattractive 2012 prices incentivised collectors to stock build and this supply will likely be unlocked by higher prices in 2013. We expect platinum’s price to tracks gold’s, but it should outperform during ‘risk-on’ events.

W

Range: $560.00 - $850.00Average: $780.00

Of the precious pack, palladium exhibits the most robust fundamentals. Relatively better growth conditions should drive autocat demand growth, at a time when primary supply remains constrained and Russian state stock sales are estimated to fall to just 200 koz in 2013. While palladium’s price should track that of platinum’s, its upside may be limited by: 1) an absence of a China stimulus, 2) the threat of a sharp lift in the supply of stockpiled autocat recycling (more palladium-intensive) and 3) its typically illiquid trading conditions (pronounced during periods of macro uncertainty). Nevertheless, a shift in investor sentiment towards palladium is helping overcome these constraints – particularly as this white metal plays catch-up, after being largely ignored for much of 2012.

Au Ag Pt Pd

A year of consolidation beckons for the platinum group metals. On the one hand, the economic woes of the developed and developing world look set to continue, if indeed worsen. The US may be the one bright light, whereas Europe seems to plunge further into the mire with each passing month. The predicted meteoric rise of the BRIC nations has yet to materialise. On the other hand, producers are operating perilously close to costs of production, whilst the labour situation in South Africa is far from settled. Further unrest is almost inevitable as social conditions deteriorate and the power struggle both between and within the unions continues. The situation is further complicated by the niggling doubt in the back of many people’s minds as to whether ESKOM will be able to keep the lights on. Given this precariously balanced demand versus supply scenario, could investment come to the rescue and tip the scales in favour of higher prices? The fact that both the platinum and palladium markets are beginning 2013 with historically long speculative positions would seem to preclude this. Hence, the logical outcome in terms of price is a year for the relative status quo.


18

Anne-Laure TREMBLAYBNP Paribas, London

Range: $1,530 - $2,000 Average: $1,865

Gold is tightly linked with the expansion of money supply, particularly in the US. The expansion of the Fed’s balance sheet through QE3 should be supportive for the metal, at least in the first half of 2013. The outlook beyond that will largely depend on the evolution of central banks’ monetary policy and equally, on market anticipations of that evolution. After a final rally in the next few months, we expect gold prices to peak in mid-2013. The downside will, however, be limited by pockets of strength, including physical demand from China and India, and official buying. Tail risks concerning a break-up of the eurozone have declined, but the ongoing stand-off between Democrats and Republicans around the issue of the deficit may prompt some safe-haven buying.

W

Range: $25.00 - $45.00 Average: $39.05

As a geared play on gold, silver moves tend to be sharper than its precious metal counterpart. As a result, silver has more upside potential in the first part of 2013, but its downside potential is greater later on. The market has been in surplus over the past several years, and this is expected to remain so in 2013. A turnaround in gold’s fortune in 2013 will likely prompt a sharp decline in interest in silver, and this will be reflected notably by redemptions from ETFs. A moderate pick-up in global economic growth should be supportive for silver industrial demand, but this will not make up for lower investor interest, in our view.

W

Range: $1,475 - $1,850Average: $1,705

Platinum’s fate is tied to the evolution of South African mine supply. The severe disruptions to production subsided towards the end of 2012, but important risks persist, whether from strikes, mothballing of mines or safety-related closures. The market is currently near balance, but any production losses would tip it into deficit. On the demand front, we believe that the worst is now behind us. After a dismal 2012, European car sales are not expected to contract in 2013, although growth will likely be subdued. A higher gold price in the first half of 2013 should be supportive of platinum investment demand as well.

W

Range: $600.00 - $940.00 Average: $780.00

Palladium has strong fundamentals and we expect the price to reflect this state of affairs. Mine supply depends heavily on South Africa and Russia, where there are limited growth prospects. On the demand side, the rate of growth in vehicle sales in the US is expected to slow in 2013, but we expect a pick-up in Chinese auto sales. Overall, the auto industry is expected to drive demand for the metal higher. The size of the market deficit should in turn attract investors to this market. Over the course of 2013, we believe that the palladium price has the most upside potential.

Au Ag Pt Pd

Bhargava VAIDYABN Vaidya & Associates, Mumbai

Range: $1,515 - $1,800Average: $1,670

Gold bull run should slow down due to reduced liquidity. The eurozone debt crisis and US economy issues will at times bring in some volatility. Overall demand for gold should come down. Supply of scrap should increase.

In countries such as India, a systematic attempt is being made to introduce new paper products and bring out old gold hoardings to reduce gold physical demand/imports. These all should have a negative impact on price.

Gold will continue to be the most important store of value in all portfolios.

W

Range: $23.50 - $37.00Average $30.25

The poor health of the world economy will affect industrial demand for silver. The past volatility of silver has scared off many investors. This will reduce long-term committed funds for this metal. Fabrication demand for silver for silverware and jewellery is also reducing. The relationship with gold will support some investment.

W

Au Ag


19

Alexander ZUMPFEHeraeus, Hanau

Range: $1,500 - $1,895Average: $1,751

At the time of writing, gold is caught between a questionable US budget compromise and initial signals that the Fed might slow down its quantitative easing programmes sooner than widely expected. Cheap money has been one of the major triggers behind the metal’s recent bull trend. Market players will hence watch carefully any rumours, data and figures that could imply a possible change in monetary policy. Though inflation is currently not of major concern, it will remain at the back of investors’ minds. If the global economy manages to gain traction, it will increase credit demand and the velocity of money. While this initially implicates higher inflation rates (gold positive) it also paves the way for higher interest (gold negative!). As long as the environment of negative real interest rates persists, gold will remain on the shopping list of investors though. However, it is increasingly vulnerable to lose market share against other asset classes. Central banks are likely to diversify further away from the US dollar into gold. The jewellery industry has recently been less supportive. The weak rupee together with increased duties dampened demand in 2012. This adds to the increasingly volatile gold price itself. Price swings are characteristic for investment markets; however, physical consumers are not only price, but also volatility sensitive. While India is unlikely to deliver a major positive stimulus because of that, we expect China to remain a stable and supportive factor. Yet, it is unclear to what extent that demand comes out of the investment or the jewellery sector.

W

Range: $29.00 - $35.00 Average: $31.50

With no shortage of supply, silver heavily depends on the demand side of the market. While the metal is traditionally overdrawing developments of the gold price, it will gain some of its own stimulus from fabrication demand if global growth accelerates. However, buying interest from the photovoltaic industry – one of the most recent physical demand drivers – is forecast to be subdued, with the sector remaining in consolidation mode. After a decade of decline, the demand from the photography industry will not go down much further. With fabrication demand unable to absorb the surplus, investment demand will continue to play a pivotal role. Investors will remain on the buy side as long as gold performs well. However, silver ETF holdings are still near their multi-year highs. In an environment where gold may struggle to move higher, the upside remains capped!

W

Range: $1,550 - $2,000Average: $1,690

South Africa will dominate the price action on the platinum market in 2013. The only question is to what extent potential further labour action, electricity price increases, electricity supply disruptions and general instability have already been priced in. Further escalation, combined with production disruptions can result in another round of price spikes. The top of this price action is hard to predict, especially since it might attract speculative buying. Rising production costs will weigh on the profitability of miners, which is likely to set a floor to the price. However, from a pure fundamental point of view, the upside is also limited. The number one consumer, the automobile industry, seems to be sufficiently hedged and stocked – especially with the light vehicle production in Europe being rather subdued. Automobile demand in emerging markets is much more focused on petroleum powered cars – hence a palladium factor – than in diesel engines. Additionally, the trend towards more fuel-efficient cars, bearing a smaller PGM load, remains intact. Keeping the muted demand picture in mind, we consider a fundamental deficit as unlikely. Purchasing from the jewellery industry traditionally reacts in a price-sensitive way. China and India in particular have recently shown good buying on price dips out of that sector and we expect this bargain-hunting to persist.

W

Range: $550.00 - $800.00 Average: $700.00

We expect palladium to relatively outperform platinum in 2013 and 2014. With depleted Russian stocks – hence being unable to sell in periods of strong prices – South Africa will come to the fore as number one producing country. That leaves palladium vulnerable to the same supply risks as platinum – with the same open question: to what degree is that factor already priced in? Demand out of the automobile industry continues to be promising, with growth in gasoline-driven light vehicle output in emerging markets being intact. Even diesel-driven engines deliver signals of becoming a supportive demand factor for the metal. The trend towards substitution of platinum by cheaper palladium represents an additional source of demand that will continue to accelerate. An increasing portion of secondary supply will add significantly to the supply side and thus reduce risks of shortage.

Au Ag Pt Pd


20

The London Bullion Market Association is delighted to congratulate the winning analysts in the 2012 Precious Metals Forecast (see table below).

The aim of the LBMA Forecast is to predict the average, high and low price for the year ahead in each metal as accurately as possible. The prediction closest to the average price wins (based on the average $ daily pm fixing price). In the event of a tie, the forecast range is taken into account.

Many thanks to all the Forecast contributors for another excellent year. Forecasters correctly predicted price rises in 2012 for gold, silver and platinum, although they were more bullish in their predictions compared to the actual average price outturn for 2012. Forecasters were also bullish about the palladium price, predicting a 12.3% price increase, although the average price actually fell by 1.6% in 2012 (compared to the average price for the first week of 2012).

Congratulations to the four winning analysts. The most impressive forecast prediction was by Thorsten Proettel, who picked up the winning prize for silver by predicting a price of $31, which was within 0.5% of the actual average price for 2012. Next best was Tom Kendall’s price prediction for platinum (0.8% difference from the average price), followed by René Hochreiter for gold and Frederic Panizzutti for palladium, with differences of 1.1% and 2.8% respectively. Commiserations go to Carl Firman, who was in contention to win in two metal categories but unfortunately lost out marginally in both.

The LBMA is grateful to PAMP SA for its generous donation of four 1 oz gold bars which will be awarded to the 2012 winning analysts in each of the four precious metal categories.

2012 ForecastWinners

Metal 2011

AveragePrice

Average Price in 1st week

January 2012

Average Forecast

2012

2012 Year Average

Winning Forecast

2012 Forecast Winners

Company

Gold $1,572 $1,603 $1,766 $1,669 $1,650 RenéHochreiter


Silver $35.11 $28.96 $33.98 $31.15 $31.00 Thorsten Proettel LBBW

Platinum $1,720 $1,412 $1,624 $1,552 $1,565 Tom Kendall Credit Suisse

Palladium $733.63 $655.00 $735.52 $644.33 $662.50 Frederic Panizzutti


21

$1,3

00

$1,2

00

$1,4

00

$1,5

00

$1,6

00

$1,7

00

$1,8

00

$1,9

00

$2,0

00

$2,1

00

$2,2

00

$2,3

00

$2,4

00

$2,5

00

$2,6

00

Adams, William

Brebner, Daniel

Cooper, Suki

Dincer, Bayram

Fertig, Peter

Firman, Carl

Hochreiter, René

Jansen, Michael

Jollie, David

Kendall, Tom

Klapwijk, Philip

Murenbeeld, Martin

Nagao, Eddie

Norman, Ross


Proettel, Thorsten

Rhodes, Jeffrey

Savant, Rohit

Smith, Dan

Steel, James


Tully, Edel

Turner, Matthew

Vaidya, Bhargava

Widmer, Michael

Wrzesniok-Rossbach, Wolfgang

Name

Fastmarkets

Deutsche Bank

Barclays Capital

LGT Capital Management Ltd


VM Group


JPMorgan Securities

Mitsui & Co Precious Metals Inc

Credit Suisse Securities (Europe) Ltd


DundeeWealth Economics


Sharps Pixley Ltd


LBBW

INTL Commodities

CPM Group

Standard Chartered Bank

HSBC

BNP Paribas

UBS

Mitsubishi Corporation International (Europe) Plc


BAML

Degussa Goldhandel GmbH

Au$1,603 $1,766

$1,6691st week Jan

2012Forecast Avg2012

Avg Price 2012

Average

HighLow

22

$5.0

0

$0.0

0

$10.0

0

$15.0

0

$20.0

0

$25.0

0

$30.0

0

$35.0

0

$40.0

0

$45.0

0

$50.0

0

$55.0

0

Adams, William

Brebner, Daniel

Cooper, Suki

Dincer, Bayram

Fertig, Peter

Firman, Carl

Hochreiter, René

Jansen, Michael

Jollie, David

Kendall, Tom

Klapwijk, Philip

Nagao, Eddie

Norman, Ross


Proettel, Thorsten

Rhodes, Jeffrey

Savant, Rohit

Smith, Dan

Steel, James


Tully, Edel

Turner, Matthew

Vaidya, Bhargava

Widmer, Michael


Name

Fastmarkets

Deutsche Bank

Barclays Capital



VM Group


JPMorgan Securities





Sharps Pixley Ltd


LBBW

INTL Commodities

CPM Group


HSBC

BNP Paribas

UBS



BAML


$60.0

0

$65.0

0

$70.0

0

Ag Average

HighLow

$28.96 $33.98

$31.151st week Jan

2012Forecast Avg2012

Avg Price 2012

23

$1,1

00

$1,0

00

$1,2

00

$1,3

00

$1,4

00

$1,5

00

$1,6

00

$1,7

00

$1,8

00

$1,9

00

$2,0

00

$2,1

00

Adams, William

Brebner, Daniel

Cooper, Suki

Dincer, Bayram

Fertig, Peter

Firman, Carl

Hochreiter, René

Jansen, Michael

Jollie, David

Kendall, Tom

Klapwijk, Philip

Nagao, Eddie

Norman, Ross


Proettel, Thorsten

Savant, Rohit

Smith, Dan

Steel, James

Stevens, Glyn


Tully, Edel

Turner, Matthew

Widmer, Michael


Fastmarkets

Deutsche Bank

Barclays Capital



VM Group


JPMorgan Securities





Sharps Pixley Ltd


LBBW

CPM Group


HSBC

INTL Commodities

BNP Paribas

UBS


BAML


$2,2

00

$2,3

00

Pt Average

HighLow

$1,412

1st week Jan2012

Name

$1,624

Forecast Avg2012

$1,552Avg Price 2012

24

$200

$100

$300

$400

$500

$600

$700

$800

$900

$1,0

00

$1,1

00

$1,2

00

Adams, William

Brebner, Daniel

Cooper, Suki

Dincer, Bayram

Fertig, Peter

Firman, Carl

Hochreiter, René

Jansen, Michael

Jollie, David

Kendall, Tom

Klapwijk, Philip

Nagao, Eddie

Norman, Ross


Proettel, Thorsten

Savant, Rohit

Smith, Dan

Steel, James

Stevens, Glyn


Tully, Edel

Turner, Matthew

Widmer, Michael


Fastmarkets

Deutsche Bank

Barclays Capital



VM Group


JPMorgan Securities





Sharps Pixley Ltd


LBBW

CPM Group


HSBC

INTL Commodities

BNP Paribas

UBS


BAML


$1,3

00

$1,4

00

Average

HighLow

$655.001st week Jan 2012

Name

Pd$735.52Forecast Avg 2012

$644.33Avg Price 2012

25

As the chart below illustrates, analysts participating in the LBMA Forecast have an excellent record in predicting the direction of the gold price movement. Indeed analysts have correctly predicted the direction of the gold price every year (with the exception of 2004) since the Forecast Survey began in 2001. This is an excellent record which compares impressively against other forecast surveys. The gold price has risen four fold in the last seven years and analysts are predicting a further increase of 5.3% in 2013 (since the first week of January 2013) to $1,753. And if forecasters’ predictions prove as accurate this year as in previous years then we are all set for a further increase in the gold price during 2013.

Forecast 2013 is published by the LBMA. For further information please contact Aelred Connelly, London Bullion Market Association, 1-2 Royal Exchange Buildings, Royal Exchange, London EC3V 3LF,Telephone: 020 7796 3067 Fax: 020 7283 0030 Email: [email protected] www.lbma.org.uk

Given the freedom of expression offered to contributors and whilst great care has been taken to ensure that the information contained in the Forecast is accurate, the LBMA can accept no responsibility for any mistakes, errors or omissions or for any action taken in reliance thereon.

$2

00

2012

2013

2011

2010

2009

2008

2007

Forecast average

Key

Average price

First weekof January

2006

2005

2004

2003

2002

2001

$0

$4

00

$6

00

$8

00

$1

,00

0

$1

,20

0

$1

,40

0

$1

,60

0

$1

,80

0

$2

,00

0

Forecast 2001-2013Review

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