The aggregate 2005 LBMA Precious Metal Forecasts have proved exceptionally reliable as the first half of the year closes. The bad news is that metal markets have been asleep.
The difference in the average price for gold at the end of the first and second quarters was just 22 cents. There was no new high and no new low for the year. It was an identical situation for silver - no new high or low and a quarterly improvement of just 9 cents. Ditto palladium where the price improved by $1.22 an ounce.
At least platinum had a new high of $899/oz, an improvement of $13.67/oz, or 2%, which moved the average price $3.46/oz higher from the end of the first to the second quarter.
That resulted in very little movement in the analyst rankings between quarters. The top three positions remain intact led by Rhona O'Connell of ROC Consultancy and GFMS Analytics in London, Frederic Panizzutti of MKS Finance in Geneva, and Philip Klapwijk of GFMS, also in London.
Jon Bergtheil of JP Morgan in London remains the best gold price forecaster, but he gave up two positions overall to Alexander Zumpfe of Dresdner Kleinwort Wasserstein in Frankfurt. So Zumpfe moves up to fourth and Ross Norman of TheBullionDesk.com retains fifth place.
Peter Richardson of Deutsche Bank in Sydney held onto first place in the silver category, with Michael Dudas of Bear Stearns New York the runner up. O'Connell won both the platinum and palladium leagues. Klapwijk placed second in platinum and Panizzutti second in palladium.
Rest of the year
Asked for her view on the key precious metals until year end, O'Connell had this to say:
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Platinum will move into surplus over the next few months. Without a renewed flow of funds into commodities as an asset class I find it hard to justify sustained prices much over $900/oz.
That said, of course, there is an increasing awareness of commodities out there along with a number of bankers and brokers trying to raise the profile further, so I could be totally wrong!
Palladium remains plagued by above-ground inventory although as the Stillwater stockpile is run off (due to finish end of first quarter of 2006) that may change sentiment slightly. View unchanged (average price forecast is $195/oz).
Gold is interesting. The much vaunted "de-coupling" from the euro may be reversed as (if) Europe reaches some kind of compromise over the Constitution.
I remain convinced that one of the results of the political and economic tensions in the EU is asset rotation out of the euro in favour of, inter alia, gold.
The September election in Germany is key. If Frau Merkel takes over from Chancellor Schroeder then with her more pragmatic approach to foreign policy there may be a tentative renewal of confidence. This should initially not help gold, but ultimately, with the US continuing its high levels of expenditure, gold would again benefit.
Conclusion; a stressful summer, but a good fourth quarter for gold.
I love the silver market though I'm glad I don't have to trade it. I know the forecast is badly wrong (Hi $7.5; Lo $5.5; Av $6.25) but every time I see that metal rally sharply I just know someone's going to get hurt.
With the similar caveat as that applied to platinum, I cannot see it above $7.50/oz and would be much more comfortable at $7/oz. The industry's pricing entry point did seem to have risen from $6.80-90 to more like $7.10 but after recent action I suspect that they can afford to hold off again.
After its bruising performances in the first half of this year I would expect speculative forces to stay on the sidelines for a while and look for better opportunities elsewhere.
