One-Year Gold Outlook: $1,849 an Ounce

About a year ago, 700 bankers, traders and investors sat in a room at the annual London Bullion Market Association conference and predicted that gold would rise above $2,000 an ounce by the end of 2012.

This week, those same gold industry bigwigs agreed on a much more modest forecast. They are projecting that gold prices will rise to $1,849 by next September – a mere 7% bump from where it is now, and a decline from the all-time high of $1,920 the yellow metal touched last September.

Let’s hope they’re as wrong this year as they were last.

After touching a six-month high of $1,785 an ounce in early October, gold has fallen back a bit to $1,716 an ounce as of this morning. Year-to-date, gold prices have risen roughly 10%. That’s pretty much on par with last year’s rise, but shy of the 17% annual gains gold has averaged during what is now a 12-year bull run.

A 7% gain between now and September wouldn’t be much different, given that it’s 10 months rather than a year. But 7% is nothing to sneeze at. That’s better than the 5.5% gains the S&P 500 has achieved this year.

Regardless of the projections that came out of the LBMA conference, they should be taken with a few dozen grains of salt. I already mentioned how off last year’s prediction was. But consider this, too: their eventual projection for next year drastically changed from what is was at the beginning of the conference.

When surveyed at the outset of the week, the 700 delegates pegged gold at $1,914 an ounce a year from now – an 11.7% rise. By week’s end, however, their tune had changed, and their gold forecast became far more conservative.

I’m not trying to suggest that 700 of the world’s foremost authorities on gold don’t know what they’re talking about. Who am I to question where those people think gold is going?

My point is, if their prediction fluctuated so much during the course of just a few days, then it probably would have produced a different result next week…or the week after…or the week after that. No one truly knows where gold is going.

But here’s one thing we do know about gold: it’s likely to keep going up. It has for 12 years now – gaining no less than 5.5% in any of the last 11 years.

And now that we’re staring down the barrel of a fiscal cliff, gold should continue to be attractive as a safe haven in uncertain economic times.

Good investing,

Chris Preston