Gold Price Prediction Near Perfect

by JDH on September 29, 2012

Three quarters down in 2012, with one to go. How are we doing? I’m doing fine, thank’s for asking. My portfolio is up 28% for the year, which isn’t spectacular, but if you want to compare it to other measures, here’s how the rest of the markets are doing year to date:

DOW: up 9.98%

S&P 500: up 14.65%

Gold: up 13.15%

TSX: up 3.03%

TSX Venture Exchange: Down 10.11%

So, given the competition, I’m quite satisfied with my results. How are you doing?

Buy High Sell Higher Reader Predictions

Each year I ask readers to submit their predictions for where the Dow and the price of gold will close at the end of each quarter.  You can read them all on our 2012 predictions page.

The group predicted, on average, that the Dow would close on September 30 at 11,864.  Sorry guys, we weren’t even close, with the Dow closing at 13,437. Apparently money printing is a good way to keep the stock market high leading in to an election.

Congratulations to ChrisC with his prediction of at 13,220, only 1.7% away from the correct number. Runner up goes to Uboat with his prediction of 13,000. As an aside, last quarter Uboat won and ChrisC was second, so when it comes to the Dow, these are the guys to watch. Uboat predicted 13,500 for the Dow at year end (essentially unchanged from where we are now), and ChrisC predicted 14,275, so we will see where we end the year.

We did a much better job predicting the price of gold. The group, on average, predicted gold would close this quarter at $1,758 per ounce, and the actual closing price was $1,774.50, a mere $16.67 off the actual closing price. That’s less than a one per cent margin of error, which is a virtual bulls eye. Well done.

First prize goes to to Uboat (again) with an excellent prediction of $1,750, followed by Peter518 at $1,700. Well done.

What fascinates me about our prediction for gold is that the group on average had the best prediction. Uboat was very close, but the group was even closer.

So, in case you are wondering, the price of gold, according to the group, will close the year at $1,896, so gold will be a good investment for the next three months.

How did I do? Prediction-wise, not great. I predicted the Dow would drop to 10,000, and I predicted gold would rise to $2,000, so no gold stars for me. However, as I mentioned at the start of this article, my portfolio is up 28% so far this year. At the end of June I was up 4.2%, so my over-weighting on gold and silver stocks has helped. (Gold was $1,597 at the end of June, rising to $1,774 today, so it was a good quarter for gold).

My big winners:

FR.TO – First Majestic Silver Corp. up 98% since purchase, but it’s a small, speculative holding, so it hasn’t helped the overall number significantly. It’s the blue chips which are my larger holdings that have helped the most:

FNV.TO – Franco-Nevada Corp. up 45% since purchase;

CEF.A.TO – Central Fund of Canada up 51% since purchase, and

RGL.TO – Royal Gold Inc. up 55% since purchase earlier this year.

I placed a big bet on Royal Gold, and it now represents 18% of my portfolio. You can search the archives for my full comments on Royal Gold, but I purchased it when it was low, and was paying a 2% dividend, so I viewed it as a low risk pick. I didn’t expect it to shoot up like it has, but I glad it did.

I’m currently only 7% in cash, my lowest cash level in years, so I’m obviously assuming a lot of risk at this point. A significant market crash at this point will not be good news for me. However, I assume the Powers That Be will continue to hold the market up until the election, so my profit taking will begin later in October, prior to the election.

That’s my report; all comments welcome. Thanks for reading, and have a good week.

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