Fool's Gold Report: Gold, Silver Inch Higher Despite Lower Bullion Forecasts; Miners Drop

Gold and silver managed to gain ground even though precious-metals analysts cut their target prices for bullion in 2014. Find out more about the moves here.

Jan 9, 2014 at 6:31PM

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

It's bad enough for gold to have endured the huge price drops it has suffered in the past year or so. But lately, gold analysts have piled on the pessimism about the yellow metal, reducing their forecasts for gold prices in 2014, and creating more negative sentiment. Yet, even with those moves, spot gold prices actually rose $2 per ounce, to $1,228 today, while silver inched up $0.05, to $19.58 per ounce. SPDR Gold (NYSEMKT:GLD) outperformed with a 0.3% rise, while iShares Silver (NYSEMKT:SLV) gained just $0.01 on the trading day. Platinum-group metals were almost entirely flat, with platinum unchanged at $1,414 per ounce, and palladium falling $1, to $734.

Today, it was time for Bank of America (NYSE:BAC) and its Merrill Lynch analysts to weigh in with their views on gold, and the firm cut its gold forecast by 11%, to $1,150 per ounce. Even more draconian was B of A's cut in silver target prices, with a 21% decline for average silver prices to $18.38 for 2014. Moreover, those are just average prices, and B of A said that selling pressure could end up sending prices down to the $1,000 level before starting to find some support from Indian and Chinese buyers of physical metal.

Meanwhile, Barclays issued predictions that weren't quite as dire, but still implied severe volatility. Barclays expects average gold prices of $1,205 this year, with a range from $1,050 to $1,375 likely. The firm pegs silver prices at $19, while platinum and palladium will climb slightly from current levels to $1,539 and $768 respectively. Relying largely on supply-and-demand fundamentals, Barclays sees supply deficits in palladium being a catalyst for continued strong performance for the industrial metal.

Finally, TD Securities gave its gold and silver outlook, seeing gold falling to $1,125 by mid-year before rising to $1,225 by the fourth quarter. Silver is seen having a similar pattern, falling to an average of $17.25 before recovering to $18.90.

On the mining side of the gold market, miners were generally down, with Market Vectors Gold Miners ETF (NYSEMKT:GDX) falling 1.6%. But Goldcorp (NYSE:GG) was an exception, rising more than 1%. The company gave preliminary figures for 2013 that included record gold production for the fourth quarter, with forecasts for 13% to 18% volume gains in 2014, and a drop in all-in sustaining costs to $950 to $1,000 per ounce. Efficiency gains like these will prove critical for all miners in the tough gold and silver environment, but with expectations for further cash-cost declines in the next two years of about 15% to 20%, Goldcorp is cementing its status as a leading miner in the industry.

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Fool contributor Dan Caplinger owns warrants on Bank of America. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends Bank of America. The Motley Fool owns shares of Bank of America. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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