The consensus seems to be in gold's favor for 2011. The London Bullion Market Association (LBMA) just released a survey of 24 precious metals analysts that summarizes their expectations for gold in 2011, and the results are encouraging.
Their average gold price forecast is $1,457, a 19.0% increase on the 2010 average price, with a high forecast of $1,632. In fact, this is the second year in a row that the LBMA contributors have predicted higher prices for all precious metals, including gold, silver, platinum, and palladium.
Let's take a look at some individual predictions by some respected analysts and examine the thought process that underlies each forecast.
This week, London-based metals consultancy GFMS predicted gold prices could trade as high as $1,500 by midyear and $1,600 at the end of 2011. Much of gold's expected run-up in 2011 and early 2012 is likely to be driven by still-low interest rates, poor returns elsewhere, the elevated level of government debts in Europe, the United States and Japan, and lastly nagging concerns over quantitative easing in the United States and its ramifications for the dollar.
David Einhorn, President of $8 billion hedge fund Greenlight, sees gold as sort of the inverse of what's going on with the paper monies. He points to the ongoing currency weakness in not only the U.S. dollar, but also in the Yen, Euro, and British Pound, noting that policymakers are in a sort of battle to see who can devalue the fastest. With no end in sight for competitive devaluations across the globe, Einhorn believes that the economic backdrop for the price of gold remains particularly attractive.
SeekingAlpha looks for gold to climb to a minimum of $1,800 and silver to $45 in 2011, driven by weakness in the euro and the dollar, as well as the inflationary pressure that could follow if the U.S. Federal Reserve steps up its economic stimulus activity.
Even more bullish is Avalon Partners chief investment officer Peter Cardillo, who sees a high of $1,800 for gold prices in 2011. We have a huge national budget deficit that we haven't seen much progress on, and the debt problem in states could also accelerate, he said, adding that both factors could weigh on the dollar, and push commodity prices higher.
Scott Carter is Chief Executive Officer of Goldline International, Inc. and host of The American Advisor talk radio show.
(Sources: Gold May Climb to $1,600 an Ounce on Low Rates, Debt Concerns, GFMS Says, Bloomberg, January 13, 2011; Gold Price Outlook Remains Bright, Says Einhorn, GoldAlert, January 12, 2011; 10 Economic Predictions for 2011, SeekingAlpha, January 12, 2011; Barclays: Gold price to average $1,500 an ounce in 2011, Reuters, January 7, 2011; Commodities outlook for 2011, CNNMoney, January 5, 2011)