Short and Long Term Gold Forecast

Copper prices are a good indication of economic growth. A lot of analysts use the term Dr. Copper when analyzing and forecasting health of the economy. The price of copper is sitting just above $3 per pound and there are a few indications that prices could break below this level signaling an economic slowdown in 2012. Gold prices usually rise with rise of the economic uncertainty.

Bank of America Merrril Lynch lowered its forecast of copper prices from $3.99/lb in 2011 to $3.99/lb in 2011. "Nevertheless, our average price target implies some upside from current levels, which could emanate from policy makers in Europe starting to tackle the core of the region's problems, and increased Chinese imports, which could rise by 6% year on year. In addition, mine supply will, in all likelihood, remain relatively tight, which should prevent a meltdown on the copper market," says the report on Dec 16.

Unlike pessimistic view of some analysts like Gartman, Jim Rogers believes this gold correction is an excellent opportunity to buy in. He acknowledges the steep 11 year gold bull market brings a high chance of a big correction and likes to see prices correct for a healthy uptrend. Not discouraged by the fear on the street, he said he would get "extremely excited" if gold prices drop to $1,200 per ounce.

"I own gold and I'm not selling my gold … Somewhere down the line gold will have a correction. Gold will continue to do what gold does best. Just give it a chance.", said Rogers.

Dennis Gartman of Gartman Letter forecasts gold 11 year fiery run is over and a bear market is already in place. The pessimistic view comes as gold prices in mid-term analysis have lower highs and to confirm the downtrend prices need to go below the previous lows. This is in fact the definition of a downtrend and he predicts the trend will continue . "We have the beginnings of a real bear market, and the death of a bull.", says Gartman who correctly predicted the slump in commodities in 2008.

He sold all of his gold in expectation that gold prices would drop more than 20 percent, the common definition of a bear market.

Gold prices dipping below $1,700 an ounce due to market sell off can be a golden opportunity to buy gold coins and bullion, said Cramer in his Mad Money Show.

Solving the European economic crisis could mean “potentially crunching a minimum of $10 trillion in bank debt,” which would create a severe deflationary climate. “Almost everything will be worth less, and you can see the value of property declining immensely in Europe,” he said. “In that scenario, everybody’s saying, ‘No inflation? You’ve got to sell your gold... That’s why I think gold’s current direction will turn out to be wrong.”

."Newmont Mining CEO Richard O'Brien expects gold prices to easily hit $2,300 an ounce by next year. AngloGold Ashanti CEO Mark Cutifani forecasts $2,200. Main reason is gold production slowly dwindles and economic uncertainty increases and therefore prices will rise. Debt problems in Greece, U.S. deficit concerns and political upheaval in the Middle East are all boosting gold's price.

The bullish outlook on gold prices has been contradicted recently by a surge of interest in U.S. government debt and the dollar, and a slight dip in gold prices, reports Reuters.

Wells Fargo said on Wednesday that gold market is a “bubble that is poised to burst”. The bank did not provide specific details but mentioned that “There could be substantial risk to gold once the fear that the world is coming to an end subsides… We are worried about the downward risk.”

“We have seen the economic damage” of past bubbles and “feel compelled to ring the warning bells,”

According to a survey of the four most accurate precious metal forecasters tracked by Bloomberg over the past two years, gold prices will rise to $1,713 this year and $1,938 in 2012.

Option traders are also betting big on gold rally to continue. The number one spot is captured by the speculators betting on a $2,000 by November, followed by $1,800 for the same month, data shows as of July 29.

Merrill Lynch raised its 2011 gold price forecast by 5.3% to $1,498 an ounce from $1,423. It also increased its 2012 gold price forecast by more than 3% to $1550 from $1,500. The main fundamentals reasons behind a more bullish view on gold are:

• Many problems in the global economy that have still not been resolved,
• Debt and fiscal issues in developed countries are unlikely to find a short-term fix.

An article published on Reuters warns gold investors and in particular jewelry buyers that nothing goes up forever so beware of a crash. And what can cause this crash? A stronger dollar, strengthening U.S. economy or rising interest rates.