(24 Dec 2012)
Gold Price Forecast 2013, Buying Opportunity?, is Silver Cheaper?
Commodities / Gold and Silver 2013 By: Nadeem Walayat

TREND ANALYSIS - Gold repeatedly failed to hold the uptrend lines which keeps resolving in breaks lower. That is the pattern that the current trend line support suggests as being most probable, i.e. an imminent bounce higher towards $1710 and then another break of the trendline support which would target a trend towards $1550. Furthermore shallow trendlines imply less volatile trends for 2013, i.e. shallow up and down trends within the prevailing range.

SUPPORT / RESISTANCE - Gold is in a range trading channel, the main resistance is at $1800 and support at $1550, with a break above $1800 targeting $1900. Whilst support at $1550 looks quite strong, thus suggests a strategy of buying downtrends towards $1550 for range rallies to $1800, with potentials for a break higher that would next target resistance at $1900. Current price action in terms of the range appears to resolve towards $1550 during Q1 2013, before we can expect the next assault on $1800.

However the problem with ranges is that it is difficult to determine at what point the price breaks out, and the ultimate probability is for Gold to break higher, to first $1900 and then $2000 and the longer the range goes on the harder it tends to become for the price to actually breakout and therefore more difficult to forecast. Which means given the 18 months to date, gold could stay stuck in this range for the whole of 2013.

PRICE TARGETS - The immediate target is a low above $1550, the reaction from which suggests $1800.

MACD - The MACD indicator is weak and showing no signs of an imminent bottom, in fact it is confirming that Gold could trend lower for at least another month into late January which would time with the probability for a continuing downtrend towards $1550 and a risk that Gold could remain weak even into late February.

SEASONAL TREND - There is a strong seasonal tendency for gold to rally from November through January, however Gold is clearly not following the seasonal trend which implies inverse expectations. Therefore a weak Jan, Feb and stronger March and April.

However should Gold breakout higher above $1800 we will see Silver start to significantly outperform, so I will definitely be keeping an eye on silver especially near Gold lows of $1550 as it would be trading at deeper discount.

Gold Risks of a Down Year

Gold has not had a down year for 12 years! Add to that expectations of a trading range of 1800 to 1550. Throw in a close of $1660, and annual volatility of 20% and then that implies a 40% risk of a down year, i.e. a close below $1660, which could yet worsen if Gold rallies into the end of the year i.e. Gold closing the year at say $1710 would imply a 60% chance of a down year, whilst a close at $1600 would imply just a 20% risk of a down year.

Gold Price Forecast Conclusion

The bottom line is that whilst the Gold bull market will likely continue until ZIRP ends, however Gold bugs are not going to like hearing that the best years of gains are now probably behind gold, and that the best they can expect to achieve is gains of about 10% per annum as Gold is now in a mature bull market.
Therefore my analysis resolves to the following key conclusions for 2013 -

1. That Gold looks set to trade within a range for most of the year of between $1550 and $1800.
2. That Gold should trend higher towards the end of the year with overall probability targeting a year end close in the region of $1760, which on the last close of $1660 implies a gain of about 6%, with a 40% risk of a small down close year i.e. between $1659 and $1550.

The below graph better illustrates how the Gold price could trend during the year.



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