Gold News

Silver and Gold 2023: How Heavy Is This Cow?

A review of 2023 LBMA gold & silver price forecasts...
NO ONE knows anything, writes Adrian Ash at BullionVault in this review of 2023's new LBMA Forecast Survey of gold and silver predictions, first shared with readers of the Weekly Update email on Monday.
The last week's action in gold and silver proves that, thanks to the punditry and guess-work around it.
Charts of gold over last 3 months and silver over last 12 months. Source: BullionVault
Underpinning that vicious spike and plunge in precious metals, everyone now expects the US Fed and other central banks to stop raising and to start cutting their interest rates this year. 
Last Wednesday confirmed that view when the private-sector ADP Payrolls company said January saw the weakest US jobs growth in 2 years.
The same day then saw everyone ignore the 'hawkish' comments repeated by Fed chairman Jerome Powell after the US central bank raised interest rates yet again...
...and that ignorance helped gold and silver touch fresh 9-month highs.
But the Friday then reversed that move, and much more, when the 'official' payrolls estimate from the Bureau of Labor Statistics said the US in fact added nearly 3 times as many jobs in January as the consensus among professional analysts had predicted.
Because forecasts are useless, right?
Well, maybe.
Chart of gold's annual average price in Dollars vs. LBMA Forecast Survey's average prediction. Source: LBMA
Just to confuse the picture further still, sometimes the crowd calls it right.
Again see gold, this time the 2022 average price as forecast by professional precious-metal analysts entering the London Bullion Market Association's annual Forecast Survey competition last January.
Most of the entries as we noted last New Year were either very bullish or bearish. And so out of the 34 analysts taking part, only 3 came within $10 of the final outcome, which was itself almost unchanged from the 2021 outcome.
But as a group, the average of those 2022 gold annual-average estimates was $1801.90...
...just one-tenth of one percentage point away from the 2022 result of $1800.09 per ounce.
Put another way, how heavy is this cow?
That was the question asked of farmers, butchers and other meat-industry insiders bustling around at the West of England Fat Stock & Poultry Exhibition in Plymouth back in late-summer 1906.
More exactly, how much beef and offal will the butcher get from this ox once he has killed it?
The closest answers would win a prize. So 800 people paid 6 pence each, wrote down their guesses alongside their home address, and entered the competition.
None of them got it exactly right. The ox yielded 1,198 pounds (a little over half a tonne).
But the average guess?
"According to the democratic principle of 'one vote one value'," wrote scientist and statistician Francis Galton in a now famous article for weekly journal Nature the following March, "the middle-most estimate expresses the vox populi, every other estimate being condemned as too low or too high by a majority of the voters."
And what Galton found from the "excellent material" offered by the Plymouth live-stock competition was startling. 
The median estimate, meaning the guess bang in the middle of the entrants' range...was 1,207 lbs...less than 1% off. And the mean average was 1,200 pounds, only 0.17% out.
Galton's insight has been repeated many times since, and his 'experiment' has been repeatedly refined and developed by other academics, researchers and statisticians as well.
Sometimes, in short, the voice of the people can approach the truth, if not quite the voice of God. 
Which brings us to silver in 2023.
Chart of silver's annual average price in Dollars vs. LBMA Forecast Survey's average prediction. Source: LBMA
Seven times in the last 12 years, the average gold forecast in the LBMA competition has come around 5% or closer to the actual outcome.
For silver, that's only happened 3 times. So whatever wisdom of crowds the LBMA Forecast Survey might offer, it seems weaker for silver than for gold.
But taken more broadly, and looking simply at whether analysts as a group called the direction of prices higher or lower correctly, they managed it 9 times in 12 years for gold, and 8 times for silver. Including each of the last 4 years.
2023 will now see silver prices average nearly $2 per ounce more than they did across 2022, according to the new competition's average entry. And what's odd is that the new average forecast almost matches the average forecast from 2022.
Finally published last Wednesday, the new LBMA 2023 Forecast Survey includes a very bullish outlook from a couple of experts...
...and a very bearish outlook from a couple more.
But overall, most analysts crowd around the $23 to $24 level, giving an average average forecast of $23.65 per ounce.
Way out in front comes Bruce Ikemizu, formerly at ICBC Standard Bank Tokyo and now chief director of the Japan Bullion Market Association, with a forecast of $27 per ounce...
...followed by Peter Fertig of QCR Quantitative Commodity Research in Germany with his forecast of $26.60.
"Silver will be supported by the prospect of supply shortage and renewed interest from investors," says Bruce, with prices further boosted by "the move towards a carbon-free society helping silver demand for solar panels and other applications such as various parts in electric vehicles."
Fertig's outlook also cites strong demand for solar panels, but rests mostly on a steep retreat in the US Dollar's value on the currency market blowing a tailwind for silver priced in Dollars.
Together, that makes a "considerable rise...the most likely scenario for this year."
"Rising interest rates in the US will continue to weight on the price," counters the biggest silver bear, Debajit Saha of data and analysis providers Refinitiv (formerly GFMS and now a London Stock Exchange business).
Forecasting a plunge in silver to an annual average of just $17.50 per ounce, and contra the bulls, "Support is not expected to come from the industrial front either," he says (although solar will be strong), "as higher interest rates are set to put a drag on economic growth."
"Slowdown in offtake is expected in major physical markets such as India and China."
India's record-heavy silver demand in 2022 already looks set for a challenge this year. Because rather than cutting gold-import duty last week as the jewellery industry begged yet again, the Modi Government instead hiked silver-import duty in its 2023 Budget to the same 15%.
More measured but also bearish silver for 2023, Marcus Garvey at Australian bank Macquarie also see interest rates weighing on the metal (as they will for gold), most especially through the prism of 'real interest rates' after you account for inflation.
Those real rates, as we have often noted many times on GoldNews and elsewhere, show a strongly negative correlation with precious metal prices. And on top of that, for silver, Garvey at Macquarie sees "a period of lacklustre industrial demand growth [thanks to his bank's] forecast for a global developed market recession in 2023."
Result? A very bearish $18.63 forecast, fully $5 per ounce below the LBMA Forecast Survey's average outlook.
But further ahead? Macquarie foresees "a strong medium-term demand outlook" for silver built on "increased electric vehicle penetration and the build-out of solar generating capacity." What's more, the rush for physical silver of 2022 means that "physical balances [now] maintain the potential to get very tight during periods of firm investment demand."
Even the bears are bullish, in other words, and silver is going up in the future, if not in 2023. Or so the wisdom of analysts now says.
Read the LBMA Forecast Survey here for yourself. For silver, pay attention (maybe) to the view of last year's winner, Grant Sporre of Bloomberg Intelligence. He now forecasts a rally from the 2022 average but a drop from current levels to $22.14 per ounce.
But also note the view of Kieran Tompkins at Capital Economics. A newcomer to the LBMA competition, his price prediction comes closest to the average forecast at $23.60.
So whether or not the wisdom of crowds works for silver in 2023 like vox populi did for gold in 2022, it's worth checking out how that consensus view sees the year ahead developing.

Adrian Ash

Adrian Ash, BullionVault Gold News

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

Please Note: All articles published here are to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. Please review our Terms & Conditions for accessing Gold News.

Follow Us

Facebook Youtube Twitter LinkedIn



Market Fundamentals