Global Gold Outlook For 2013

This article is based on the Outlook Report from Global Gold in Switzerland, written by managing director Claudio Grass. It provides a fundamental view on gold, not a short term price forecast. It is widely known that short term prices are suppressed on a regular basis in a counterintuitive way, just like today (January 4th).

We don’t claim to have a crystal ball. In this article we bring our view on the expected direction of the political and economic developments. We use our common sense, and we refrain from using complicated models which no one understands. For each scenario, we indicate how likely it is to happen and what the impact would be on the gold price.

Scenario 1: Status quo

Under our “status quo” scenario, governments will continue essentially as they have so far, delaying any real problem solving. They will continue to  “moderately” inflate currencies, bailout banks etc. Furthermore real economic growth rates will stay low.

Probability (estimate): 80%. We think that this scenario is the most likely for the coming months and years. Governments can’t and won’t tackle any real problems; they will follow their “muddle through” policy as they have done so far.

Impact on gold: As in recent years the current policies of governments positively impact gold prices.

Scenario 2: Back to “normal”

In this scenario central banks worldwide abandon their current monetary policy and return to a more prudent approach. This is coupled with higher real economic growth in the world.

Probability (estimate): 10%. Due to the very high debt levels in western economies we hardly think that central banks can return to their normal monetary policy. The lack of any real growth impulses leads us to believe that this scenario is not a very realistic one for the foreseeable future.

Impact on gold: A “back to normal” scenario would probably impact gold prices negatively. Historically gold has tended to perform negatively when real short term interest rates have exceeded 3%.

Scenario 3: Crisis

Crises can take on many different forms, such as a complete collapse of the financial and monetary system, a world war, civil unrest or many others.

Probability (estimate): 10%. Political developments in most parts of the western world are alarming. We think that our current financial and monetary system is not sustainable. We don’t, however, see the tipping point on the horizon quite yet.

Impact on gold: In a crisis scenario the price of gold would likely dramatically increase nominally. In real terms, gold should be an ideal medium to store value over the long term.

Global Gold’s conclusion

The only scenario which could have a negative impact on gold is a return to normality. As we deem this scenario to be relatively unlikely at the moment, we remain bullish on gold for 2013. Every price dip because of short term price fluctuations should be considered as a buying opportunity.

 

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  • Joseph E Fasciani

    This article is noteworthy because

    1. it cuts to the chase, and
    2. is specific as to outcomes, and finally,
    3. it gives chances as to how the outcomes may come about.

    I agree w/yr #1 position, that TPTB will do as they’ve always done: jawbone us to death w/BS double talk, of which Al ‘Mufu’ Greenspan was the World Champion. They cannot truly solve the problem because that will expose their role enabling the elite banksters to rob from the 90% below the elites.

    What we’re getting is summed precisely in the universal prison aphorism ‘S S, D D': ‘Same Shit, Different Day.’ Get used to it. Its Supreme Liar –oops, I meant Leader!– was just re-sElected as POTUS.

    What else do you, dear reader, propose as to what can be done, but suffer our fools not at all gladly. Resist and rise up as Constitutional patriots? If so, expect to be cut down by trigger-happy TV- & video-sated recruits and the National Guard.

    You may as well stay at home and watch yr TV every day that remains, all the way till the end, ’cause what’s coming at you faster than a speeding ballot is a Clinton on the hustle, for First Lady of Fascism.

  • Mark Bisson

    I don’t agree with this article. Gold will remain bullish while inflation risks remain on a global level. The current macroeconomics show deflation risks even at historically low interest rates. Scenario 3 Crisis would be bearish for gold as risk aversion would prompt liquidation of gold assets into dollars and treasuries/bonds

  • wdrob

    “Scenario 3 Crisis would be bearish for gold as risk aversion would
    prompt liquidation of gold assets into dollars and treasuries/bonds”

    This is convoluted logic at best. In scenario #3, complete collapse of the financial and monetary system, what logical mind would liquidate their gold for worthless dollars and bonds? Maybe you folks don’t read what you write? Or maybe I am just an idiot that is hoarding gold and silver!

    In my opinion I agree also that this outlook was spot on and is exactley what we can expect to see in 2013 and beyond.

  • http://twitter.com/GoldSilver_Rush Gold Silver Worlds

    The author of this article would like to share his reaction (we are posting it in Claudio Grass his name) on the comments made about scenario 3:

    In a deflationary depression, liquidity flows from the higher part of the pyramid downwards, amid falling willingness to assume risk. Philip Barton describes credit in his book ”safe haven – a history of Gold“ as “slumbering mistrust“, creditors try to sell the continuously falling number of liquid assets and head for the lower asset classes as a result of their rising risk aversion. At the bottom end is Gold. Since Gold does not hinge on any form of IOU, it is the only alternative to paper money and is thus at the bottom of the upside-down pyramid.

    As we can see in monetary history, during a period of profound deflation, the investment focus shifts from capital growth to capital preservation. Deflation thus always comes with falling confidence in the (perceived) root cause of the crisis (governments, banks, speculators, etc.) and their rating. Therefore the purchasing power of Gold gains also within a deflationary scenario.

    Exeter stated: “So the bottom line for the world economy does not look good. You can do much to protect yourself. Go down the pyramid; get liquid. Federal Reserve currency notes are at the very bottom of the paper part. Hold enough to get through this current liquidity squeeze when banks might close and cash will be king. Treasury bills are good too. They earn interest, but you cannot spend them in the supermarket.” Here we might add that he made this statement in the 50s, so I personally would skip the Treasury bills because it is the biggest bubble I can see. He goes on saying: “But the best asset of all, whether in inflation or deflation, will be Gold, at the base of the pyramid. Accumulate what you can of it, either above the ground, like coins or bullion, or in the ground, like mining shares.“

    In summary, an increase in prosperity and growing confidence would then boost willingness to assume risk again, causing a gradual inflow of liquidity from the Gold sector into the higher segments of the pyramid, and a new cycle starts. Deflation therefore means an improvement in monetary quality, whereas inflation means an increase in monetary quantity.

    All of this information is available on page 24/25 of the report “Physical gold: antidote against the global debt crisis” http://www.scribd.com/doc/102065884/Physical-Gold-antidote-against-the-ongoing-global-debt-crisis

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