2012 Review, and 2013 Predictions

by JDH on January 5, 2013

Welcome to 2013, and we all know what that means: it’s time to review our 2012 predictions. At the end of last year I asked for the consensus on where we would end the year, and now, a year later, I can reveal the results:

The Dow ended 2012 at 13,104.74, which was a lot higher than your average prediction of 11,725. The winner of the “closest to the hole” prediction was Peter518 with an amazingly accurate prediction of 13,000, only 105 points from the correct closing value. NelsonS was also very accurate at 12,921, only 183 points from the actual value, and Uboat had a respectable prediction of 13,500.

How did I do?

Horribly.

I assumed that the massive increase in government spending would hurt the economy, and I predicted a 9,500 closing level, so I was not even close. The group’s average prediction was 11,725, so we were largely guilty of the same erroneous thinking.

Of course I don’t believe we were wrong; I believe we are just not correct, yet. Yes, that’s semantics, and you need to get both direction and timing correct to have an accurate prediction, so obviously I, and we, at the moment, are completely wrong. But who among us truly believes that trillions in deficits won’t have an impact on the real economy, eventually?

My mistake was in ignoring the fact that 2012 was an election year, so obviously the incumbents would do whatever was necessary to remain in power. They turned the money printing machine up, and that kept the markets high. I should have realized that. However, can they do that forever? I don’t believe so, which is why we will eventually have a correction.

However, as Doug Casey says, inevitable is not the same as imminent, so we could continue meandering along for quite a while. Who knows?

As for the price of gold, we closed 2012 at $1,674 per ounce, and winning prediction was Croaker at $1,590, only $84 from the correct closing price. Well done. Others were close, but again we all tended to believe that gold would be much higher at the end of the year, with our average prediction at $1,896.

My prediction? Also not close, with a year end prediction of $2,100. I was obviously much too optimistic, but again, does anyone believe we will see $1,000 gold before we see $2,000 or $3,000 gold? I suspect not.

What are we expecting this year? You can read all of the details on the 2013 Predictions page, but the quick summary is this:

We expect gold to gradually increase for the year, by about $50 a quarter, ending the year around $1,850.

As for the Dow, we expect the reverse, with a gradual decline for the year, ending at 11,800.

We were quite accurate in the past, but not great last year, so presumably we watch and wait to see how manipulated the markets are, for that will be the best indication of future direction. Only time will tell.

Thanks for reading, and thanks for predicting, and see you next week.