GOLD — Hi : $2100 Lo : $1590 Average : $1765
Black swan events are by nature high-impact, hard to predict and beyond the realm of expectations. By that reckoning financial markets are awash with them and forecasting for gold in this environment is treacherous. Never has forecasting been so difficult - gold's fortunes are primarily linked to those of the dollar and the Euro and by extension to decisions made by politicians.
Fundamentally gold remains a good bet - the market is supply constrained and demand in Asia remains robust. As such gold has a strong underpinning. However the 'economic premium' in the gold price may remain volatile, reflecting increased uncertainty and heightened anxiety during H1. On the negative side a firmer dollar (in election year) could provide a drag on runaway prices.
In his book "Black Swan Events" Nassim Taleb argues against trying to predict the largely unpredictable and recommends building "robustness" into your portfolio. In that regard - gold should continue to benefit from solid investment demand as the difficult economic themes of the last few year darken in H1 before brightening in H2. We forecast an average gold price of $1765.
SILVER — Hi : $50.00 Lo : $20.00 Average : $37.35
As with gold, we expect heightened price volatility for silver in 2012 - but more so, with investors seeing silver as a leveraged play on gold. This in part reflects heightened political and economic uncertainty which plays havoc with the commodities markets. We expect to see silver holding robust interest amongst the speculator community and gaining in respect amongst the investor community with a tightening market justifying prices well above the $20 level.
However, slower global industrial output coupled with a firm US dollar in H1 2012 should provide a drag on runaway silver prices - although we see the possibility of a brief price spike based around difficult geopolitical concerns. Should economic conditions prove less difficult than feared in H2, then there are grounds for saying that silver could benefit as a recovery stock of sorts based upon its good industrial applications. So for silver it’s a case of heads or tails / we win really.