Before I get into a prediction, let me caution readers that the prices of Goldminer stocks are not 100% correlated to the price of gold or even earnings or increases in reserves. They fluctuate mostly depending on promotion, whether it come from the company, the industry or the other major players, some in opposition like central banks.
In any case, this dynamic is not much different than the PE for an industrial company, which also fluctuates, whether it be for the company, its industry or the broad market. The prices of Gold and the Goldminers just happen to fluctuate more.
Today we have some good info from The Bull & Bear Financial Report publication edited by David Robinson, a friend since probably the early 1980’s:
The London Bullion Market Association (LBMA) asked 23 Gold analysts from around the world for their predictions on the average, high and low price range for the year ahead for Gold. Analysts who contributed to the Survey were invited to identify the top five drivers likely to influence the gold price in 2017. The top two drivers were the US dollar and US real interest rates, followed by demand in China and India, global political events and President Trump’s fiscal and international policies.
My prediction would be close to that of Joni Teves of UBS Limited, London:
Gold: Range: $1,150 – $1,450
Average: $1,350
As for the drivers, I am not too concerned about the impact of US real interest rates because while rates will be lifted, so too will the Fed let inflation drift higher until they see it as a problem. As for the $1450 high end, the USD will have to fall a fair bit, but I see that happening after Congress gets into passing a budget. Trump is asking for the moon at the same time he wants massive tax cuts. Congress will bend in his direction and approve a budget that increases debt and deficit substantially, and ratchets inflation higher and the Dollar lower. By Trump saying the USD was too high in his opinion, what he was doing was laying the groundwork for the Dollar falling after people see the next budget on its approval. In the end, though, I think the US economy will pick up a year or two later, which will bring the USD back in line with about where it is today.
