Gold Going to $2,200 ?
Morgan Stanley Predicts Gold to Hit $2,200 in 2012... Maybe as High as $2,464
This is the time when all the Wall Street houses come out with their yearly predictions for the markets.
It’s also the time when Wealth Daily does the same.
If you remember, I said oil would hit $125 a barrel.
Whether or not it ends the year at that level, I don’t know. But at some point in 2012, I believe oil will hit $125 based on the technical pattern I’m seeing in the oil chart. And that will be the high for the year.
Interestingly enough, the pattern I’m seeing in oil is the same chart pattern I’m seeing in gold.
But before I get to that, let me tell you what Wall Street houses Morgan Stanley and Goldman Sachs are predicting for the yellow metal...
Morgan Stanley is predicting gold will be the best-performing commodity in 2012 — and may make a new record high as investors look to secure their wealth against European uncertainty and slowing economic growth.
Their price target is $2,200 an ounce… with the potential to reach as high as $2,464.
Goldman Sachs is less aggressive, but bullish nonetheless.
Their price target for gold in this year is $1,940 an ounce:
We’re staying overweight on commodities as a rebound in demand revives speculation of shortages, with gold a favorite for 2012 as investors seek a hedge against Europe’s debt crisis.
Demand for gold strengthened most of last year as Europe’s debt crisis widened and the U.S. Federal Reserve pledged to keep interest rates near zero until at least mid-2013. Low interest rates increase the appeal of bullion because they generally reduce the prospect of returns on bonds.
Our view on gold is driven by our view on underlying real interest rates. It is the sharp drop in price that makes it more attractive.
One of the things I do to gauge the gold market is I go to coin and bullion dealers
Hong Kong reported this past Wednesday that their gold imports reached record heights this month as investors rushed to the precious metal before the Luna New Year — a weeklong holiday beginning on January 23 — in order to "hedge against financial turmoil."
According to Bloomberg:
Demand for gold is climbing in China as investors seek to protect their wealth against slumping property prices and equity markets amid an inflation rate above 4 percent. The nation overtook India in the third quarter as the largest gold jewelry market, according to the World Gold Council.
The country is also the biggest producer. Bullion rose as much as 0.9 percent to $1,647.45 an ounce today, the highest since Dec. 13.
I usually read Wall Street predictions with a skeptical and suspicious eye.
But I actually think they’re spot-on with their call — especially after reading the Chinese story.
And the chart of gold suggests they’re right.
Take a look:
Gold is setting up a double-bottom formation after selling off late last year.
You see, this pattern formed before — in 2008-2009.
In fact, it’s almost the exact same formation:
Gold broke out perfectly from the “W” formation… and hit the precise price target is was supposed to hit.
The current chart suggests a breakout to $1,950 — almost exactly what Goldman is predicting.
I’ve been long gold for several years. I’m still long this year.
Go Ravens!!
Brian Hicks
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SILVER GOING $34.50 or $50 IN RS.58000 or RS.76000?
Market Nuggets: Standard: Specs Could Lift Silver, But
Industrial Demand Needed To Reach $34.50 2012 Forecast
A pick-up in speculative interest could offer support for silver, but more substantive gains likely hinge on whenever industrial demand picks up again, says Standard Bank. Slower industrial demand isreflected by a decline in Chinese imports from 400 metric tons in July 2010 to 61 as of November 201.The bank says this slowdown should stabilize, lending some support to silver. More support could come if spec buying picks up again. Speculative net length, as a percentage of open interest, currently stands at 10.4%, up from 8% in the last week of December but down from the average of 19.4% since 2007,the bank says. Standard sees “room for some length to be added,” meaning upside potential for prices.Still, Standard adds: “We expect silver to average $34.50in 2012, but silver should only trade above this level once industrial demand improves and provides real demandsupport to prices--speculative interest on its own is unlikely to see the metal moving above $34.50. After all,industrial demand constitutes 55% of total silver demand.”
Price forecasts
The 2012 silver outlook can be described as cautiously positive.
HSBC, for example, revised their average forecast up $2 to $34/oz. However, analyst James Steel said “we are not unreservedly bullish.”
Looking at the forecasts of where silver prices will go shows numbers all over the chart. There are some that suggest silver could reach its record of $50 in 2012.ScotiaMocatta, says the metal may even reach $52. But, most agree that silver prices are not likely to maintain these high levels.
Where consensus does seem to gather is in a solid camp that predicts the average 2012 silver price to be in the mid $30s.
TD Securities put forth an average of $36.45, UBS said $35, and BNP Paribasforecasts an average of $35.75. There are some in the upper and lower $30s, such asSharps Pixley at $37.25 and Barclay’s Capital at $32.50.
The inconsistency in the silver forecasts returns when you begin to look at the lows, which include low to high $20s and even some predictions dipping below the $20s.
Industrial demand
Prices this year are not expected to be driven up by silver’s industrial personality. HSBC predicts that industrial demand will likely support prices, but expects growth to be moderate. ScotiaMocatta made similar predictions citing cautious consumers and the outlook for a difficult 2012 as reasons for softening fabrication demand though new applications may result in modest growth.
Mining production was expected to increase by 30 million ounces in 2011 and by a similar amount this year. Production from recycling has been on the rise and is expected to continue in 2012. Silver is a commodity in surplus and there is little indication that will change anytime soon.
TD Securities predicts that oversupply is a risk for prices.”In the past, silver’s industrial side has generated deep corrections for the white metal and we don’t expect it will be much different this time around, with a correction to materially below $25/oz entirely possible,”the firm said.
Investment activity
Given the state of supply and the potential of a global slowdown, investors should not expect supply and demand fundamentals to be a real driver of prices. On the contrary, a strong silver market in 2012, if realized, is expected to rest on the backs of investors. Market sentiment will be, by most analysts accounts, the make or break factor this year.
Many long term investors seemed to have largely maintained their positions last year. Further rebuilding of long term investments is expected. Coin and small bar demand was also strong and is expected to remain positive in 2012. Together these investors provide more support for silver prices.
But the real volatile swings in prices are likely to come if and when speculators and safe haven seekers start avidly entering and exiting the game. Economic conditions are expected to be a draw and a positive fundamental for silver at times. But, investors should have their eyes peeled on why prices move when they do.
At the ETF Securities Precious Metals Conference, Steel warned that investors should expect a lot of volatility due to a number of false positives from the euro.
ScotiaMocatta warns that currency debasement and deflation could prompt safe haven interest in the short to medium term. However, the firm also warns that though investors may show up when in need of saftey, when it appears that the West is getting their finances in order, large scale disinvestment is expected as people will likely prefer assets offering better returns.
Though the US is still plagued with debt, investors should keep their eyes on positive economic data from that nation. The dollar has made a strong showing at the start of 2012 and if this continues, even with economic uncertainty elsewhere, it could be a struggle for silver to reel in safe haven cash.