Forecasting Gold Prices A Tricky Business

In Today: War on Cash. Tomorrow: War on Gold? he discusses the scenario that foresees central banks ban or punitively tax cash deposits. A number of commentators believe this would be positive for gold, arguing people will buy the precious metal instead of holding bank deposits, and/or use gold transactionally, which will increase demand for gold and its price.

But Bron is not quite so convinced.

If you’ve ever thought that forecasting the gold price was more luck than judgement, then check out Gold Price Forecasting, the Hard Core Academic Way. Odds are you’ve never seen a prediction that uses the following formula to compute the gold’s next moves!

The long and the short of this article is that it’s incredibly difficult to take into account all the “underlying variables” involved. And therein lies a warning about the next talking head you see on TV explaining gold will go up or down because of their view about one single variable they think explains all.