Gold and Silver: Why, and Where Next
Tuesday, 8/16/2022 10:01
Gold and silver price forecasts to New Year 2023...
IT MIGHT seem a strange investment strategy,
writes Adrian Ash at BullionVault.
You buy or hold an asset. Yet you expect it to fall in price.
But we can only guess the future. We cannot know it.
So spreading your investment risk always looks wise. Even if it means owning, say, gold or silver when you think that precious metals might drop.
That strategy stands out in our latest survey of BullionVault users reading our
Weekly Update emails.
When asked to name the main reason that they are investing in bullion today, fewer than 1 respondent in every 27 said it's because "Precious metals are in a bull market".
One-in-3 respondents, in contrast, named "Diversification" as their No.1 motive.
...33.9% to be precise...
...up from 30.1% in summer last year and 27.0% in mid-2020.
However, romping ahead yet again of course was "Currency debasement and inflation".
Yes, with inflation running at 4-decade highs across North America and Western Europe (home to the vast majority of BullionVault users), the loss of purchasing power in cash continues to drive the largest number of people to buy and hold precious metals.
In fact, this summer saw "Inflation" poll 39.2% among our respondents as their prime mover.
Rear-view thinking? No, the surge in the cost of living doesn't seem to be the reason for this strong showing. On the contrary, this summer's vote for "Inflation" was pretty much unchanged from summer 2021's level of 39.6%, and it came only 1.3 percentage points higher than summer 2020's reading.
Back then, inflation was running at barely 1% in the US or UK, and it was actually negative across the Eurozone.
So it's safe to say that precious metals demand among self-directed investors is led by fear of inflation and the need to diversify. Betting on "a bull market" comes at the bottom of the list. And that also stands out from the price forecasts made by BullionVault users in our latest survey.
Looking just at the forecasts from current gold owner, almost 1-in-10 (9.8%) think the price will fall by the eve of New Year 2023.
A further 16.6% think the price will show no change from current levels.
Of the rest, around 1-in-5 (22.8%) think gold will rise by 20% or more.
That leaves 1-in-2 (some 50.7%) expecting a modest 10% gain in the Dollar price between now and the start of next year.
Overall, and using the mid-2022 survey's forecasts to create a weighted average prediction, BullionVault users think gold will end the year at $1961 per ounce.
That would equate to a 7.7% annual rise for gold priced in US Dollars (and a rise of 10.5% from this morning's spot price). It would also mark a new year-end record high, topping the last day of 2020 by $170.
Crazy? Not so much.
Gold is already on track to set a new annual average record so far this year, adding 3.0% from the 2021 daily average – which was itself the 2nd new all-time annual record in a row – and already topping the outlook for another reading of $1800 repeated last New Year by the
expert analysts forecasting gold prices in the annual LBMA survey.
As for investor forecasts, silver owners show very much the same splits and patterns as gold.
A more
industrial precious metal, silver also finds nearly 1-in-10 owners now forecasting a fall by year-end, some 8.9% on BullionVault's new survey.
Another 15.2% expect no change, yet they also continue to hold the metal.
Silver prices then find a slightly more bullish skew than gold, with just over 1-in-4 (25.8%) predicting a gain of 20% or more...
...while exactly half (50.0%) foresee the Dollar price of silver rising by 10% from when we asked you last month.
Added together (and including forecasts from respondents who don't currently hold the grey metal) gives an average
Weekly Update forecast for the silver price to end 2022 at $22.01 per ounce.
That forecast would mark a rally of 9.4% from today's level. But unlike gold, it would also equal a drop from last New Year's Eve, cutting $1 off the price.
Unlike gold, silver is also lagging 2021 on its daily average price so far this year as well.
This makes sense given silver's big industrial demand.
Because pretty much everyone is
now forecasting a recession ahead, if not already. Which takes us back to inflation.
More than 1-in-3 respondents to our latest survey (34.1%) say they have had to cut back on new investments in recent months thanks to the soaring cost of living.
Another 12.6% are having to dip into their existing savings or investments to make ends meet.
Yes, this still means that more than half of our respondents (53.3%) are either able to continue saving and investing as normal or have only changed the mix of assets they buy, rather than the quantity.
But investors in vaulted bullion, as a group, tend to have a few more quid, Dollars or Euros than the population as a whole. And while precious metals are the common factor among respondents to our survey, two-in-three of them (65.7%) hold 80% or more of their self-invested wealth in other assets, making them far more representative of investors at large than the 'gold bug' tag might suggest.
Allowing for all this, our latest survey shows that inflation isn't just hitting people's standard of living today. It's also impacting their future financial well-being as well, because it's cutting new investment, stopping some people from putting money aside, and it's forcing others to dip into what they have already got.
None of that necessarily makes gold or silver a raging buy today. But it certainly looks bad for shares, real estate, crypto and even commodities – Russia's stranglehold on Europe's core or marginal supplies aside.
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