A rise in the price to more than US$2650 an ounce, driven largely by central bank buying, washed away concerns that gold had seen its best days with US$3000/oz firmly in sight for next year.

It could go higher with a research note published this week demonstrating that “anchoring bias” has meant that most gold price forecasts of the past six years have undervalued gold and missed its powerful upward trend.

Produced by the RFC Ambrian, a boutique bank specialising in the resources sector, the analysis found that consensus forecasts were often anchored to the current spot price, following short term movement rather than accurately predicting significant shifts or volatility.

The result is a remarkable graph which shows the strong increase in the gold price with a stream of forecasts hopelessly missing the trend as most of the 30 forecasts aggregated for RFC by Consensus Economics consistently shows a flat or falling future price rather than predicting the upward trend.

A heading in the RFC publication called The Alchemist best explains the point of the research: “Outsmarted by gold”.

The bank’s graph shows that in 2018 when gold was trading around US1300/oz the consensus forecast was more of the same for the next three years whereas gold start to rise strongly in 2019 to more than US$1500/oz/

In 2020, with gold sitting just below US$1600/oz. the consensus was once again for a continuation around that price whereas gold played its own game, shooting up to more than US$2000/oz in August 2020.

By 2022 when gold was struggling around US$1650/oz the consensus of forecasters was for a continuation at that level or a fall, missing the rebound to US$1900/oz.

Last year, consensus forecasts streaming off the spot price mapped by RFC were for a steady trend or fall – missing the rush to US$2400 in April this year,

The latest consensus forecast is for gold to remain around US$2600/oz, falling back to US$2500/oz around the middle of next year, though a handful of forecasts see a continued rise in the price.

UBS, a leading investment bank, has US$2900/oz pencilled in for last next year, as does ANZ. Goldman Sachs sees US$3000/oz as the achievable target.

This week’s gold price rebound after the market turmoil of the U.S. Presidential election saw a solid recovery in local share prices led by Northern Star, up 9.8% and Evolution, up 9.5%, moves which did most to lift the ASX gold index by 4.5%.

The improved tone even helped Resolute recover 6c (16.5%) to 42c following its heavy sell-off during the Mali government’s extortion of US$160 million from the Australian miner.

The same sovereign risk issue hit Perseus, which is also active in Africa, down at one stage by 17% at $2.47 before bouncing back with the gold price recovery to $2.68.

Other gold (and silver) moves of interest this week included:

  • Spartan Resources, up 12c to $1.24 as it plans to upgrade the mill at its Dalgaranga project in WA.
  • Capricorn Metals, up 33c to $6.48 on the strength of an upgraded ore reserve which encouraged Bell Potter to lift its price target from $7.23 to $7.54.
  • Sun Silver up 2c to 71c after reporting a fresh round of encouraging assays from its Maverick Springs project in the U.S, and
  • Labyrinth Resources, up 1c to 28c after announcing a $19.5 million placement at 21c to fund an acquisition.

Gold’s recovery set it apart from the rest of the market which is struggling to recover from the uncertainty created by the election of Donald Trump, his round of curious senior administration appointments, and fresh threats of a trade war.

As if the renewal of rivalry with China isn’t an event to destabilise financial markets, there’s the worsening of the Ukraine war as U.S. and British-made missiles land in Russia, infuriating its President, Vladimir Putin, who is certain to hit back, another potential gold-price boosting event.

Investment bank forecasts for next year, hopefully more accurate than the gold forecasts explored earlier, are starting to flow as the New Year edges closer with Goldman Sachs directing clients into copper and aluminium over iron ore.

The worry with iron ore is that a trade war will crimp Chinese exports of steel which have been running hot, compensating for slack domestic demand as the country continues to struggle with its property crisis.

Bank of America sees iron ore potentially falling to as low as US$75 a tonne, a level last seen in 2018 with that forecast weighing on BHP which slipped back below $40 for the first time in two months.

Other big iron ore miners held up better. Rio Tinto crept 50c higher to $116.37 and Fortescue rose by 15c to $18.08.

Lithium showed signs of stirring after 12-months in the sin bin of over-production and under-demand with the price rising by 1% over the week taking its one month gain to 10.5% — though it’s still down 42.5% on this time last year.

The planned merger of U.S. focused Sayona and Piedmont was reasonably well received, described by Macquarie bank as a win-win despite being more about survival during the lithium winter than a growth plan.

Sayona slipped 0.1c lower during the week to 3.4c. Piedmont was down 2.5c at 17c.

Local leader Pilbara Minerals shook some of the short sellers off its share register this week but fell 38c in the process to $2.77.

Mineral Resources, a gold and iron ore producer with a management problem, started well this week with a $1 rise to $34 but faded as a showdown at the company’s annual meeting over the future of its chief executive, Chris Ellison, weighed on sentiment.

The buy/sell spread in the broking community remains as wide as ever. Bell Potter is sticking with a price forecast of $61. Macquarie and Citi see $35 as good as it gets.

Uranium firmed marginally as Russia moved to limit shipments of highly processed material to U.S. helping the metal rise back over US$80 a pound and for local U-stocks to add a few cents.

Boss was up 3c at $3. Deep Yellow rose by 4c to $1.20 and Paladin gained 41c to $7.78 despite ongoing doubts about a planned merger with Canada’s Fission Energy.

Morgan Stanley, a U-bear for much of the year, said it was starting to change its tune as mine supply guidance disappointed and the Russia/U.S. situation worsened.

Rare earth stocks had an interesting week as iron ore billionaires Gina Rinehart and Andrew Forrest enjoyed mixed results with their investment plans in the sector.

Rinehart continued to cement her excellent working relationship with Trump, finding time between attending election celebrations to boost her stake in MP Materials, the biggest U.S. producer of the rare earths. It has risen by 75% over the past three months to US$18.23.

Local leader Lynas, in which Rinehart also has a strategic stake, lost 41c this week, falling to $6.88.

Hastings Rare Earths, which is a focus of Forrest, was down 1c at 26c.

Other news and market moves of interest included:

  • Petratherm snatching top speculative spot with a double-your-money run this week from 8c to 17c as interest grows in its Muckanippie titanium discovery in South Australia.
  • Santana falling by 6c to 57c after the release of a positive prefeasibility study into its Bendigo-Ophir gold project in New Zealand, a fall which sits at cross purpose with Bell Potter’s price forecast of $1.07 and CG Capital Market’s $1.22.
  • ALS, a specialist mining sector service provider, added 71c to $15.54 ahead of what UBS sees as a pick-up next year in exploration spending, setting a price target on the stock of $17.50.
  • NiCo Resources added 1c to 12c after being awarded major project status for its Wingellina nickel asset in central WA.
  • Legacy Minerals rose by 0.5c to 19c after reporting further encouraging news from its Fontenoy palladium/platinum project in NSW, and
  • Iluka slipped 10c lower to $5.42 as doubts persist over its plans to become a rare earth producer in association with mineral sands operations at Eneabba in WA. Macquarie, in a report headed “to go or not go” reckons the stock will bounce back to $6.30.