2013 First Quarter Report – Not Great on Our Predictions

by JDH on March 29, 2013

The first quarter of 2013 is over, so it’s time to review our 2013 Predictions, made by a few of you at the end of December, 2012.  As you may recall, the challenge was to predict the closing value of the Dow and the price of gold at the end of each quarter in 2013.  So, since there will be no further trading in March, we can review the predictions.  Here’s the quick summary:

We didn’t do very well.

In fact, we did so poorly that my prediction for gold was actually closest to the true number.  When I’m close, we’ve got problems.

The group predicted, on average, that the price of gold on March 31, 2013 would be $1,745.  The actual closing price: $1,597.10 Oops.  In three short months were were off by 8%.  That does not bode well for our prediction of $1,850 by the end of the year.

We all predicted much higher than the actual closing numbers; the two closest, with predictions of $1,700 per ounce, were ChrisC and yours truly.  Congratulations to the two of us, but we still missed by over $100, which ain’t great.

As for our prediction for the Dow, we didn’t do much better.

The average prediction for the Dow was 13,600; actually closing value: 14,587.54  Oops again, that’s 7% off, in three short months.

The winners were the three of you who predicted 14,000: Uboat, ChrisC, and Beginner.  Well done.  MetalMeister and I predicted 13,000, so we weren’t even close.

So what happened?

Obviously we all thought that gold would continue to rise, and the Dow would drop.  Those were reasonable assumptions, given the massive money printing, high unemployment (regardless of what official government figures say) and other issues of our time.  Real disposable incomes per capita are lower than they were in December 2006, and yet the stock market is at new highs?   No wonder we expected the Dow to drop. But that didn’t happen.  Gold has tested the $1,550 level four times in the last two years, and the Dow is making new (notional) highs.

How could we all be so wrong?

We were wrong as of March 31, 2013, but that may be an error of timing, not an error of direction.  I will be shocked if the Dow continues to make new highs forever.  I will be shocked if gold continues to fall for years and years.  Eventually reality has to take over.

Check back tomorrow morning for my normal Saturday commentary, where I will have some more detailed thoughts on reality.