Gold Digger: Why gold forecasts always seem to fall short

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• Gold price forecasts undershoot 80% of the time, RFC Ambrian says
• Forecasting can affect companies looking to fund new projects
• Is there a better way?

Unless your name is Matt Groening, predicting the future is a fool’s errand.

From a Trump presidency to Elon Musk’s CyberTruck (aka The Homer), The Simpsons have certainly clocked up more wins than the boffins responsible for saying where commodity prices are headed.

Forget about smashing it out of the park, analysis from RFC Ambrian shows most gold price forecasters are barely registering a hit.

According to an analysis in its latest edition of The Alchemist newsletter, from January 2018 to October 2024 80% of all gold price predictions have underrated the future gold price.

At the 12-month mark 81% of forecasts have fallen short of the mark, rising to a whopping 90% at the 20-month mark.

RFC explains this by saying forecasters are commonly using ‘safe’ forecasts by using the current gold price as an anchor point, typically predicting a negative nominal price movement.

“In contrast, actual gold price movements, shown in Figure 3, display a distribution with wide tails that expand over longer intervals. Additionally, actual performance is positively skewed, and this skew intensifies over extended time frames,” RFC says.

“This analysis highlights a form of Anchoring Bias in consensus forecasts, an overreliance on a “safe” view and starting point that limits both adaptability and volatility.

“Much like Marvel’s Black Panther, who initially restricts Wakanda’s potential by clinging to the ‘safe’ and stable, but outdated, tradition of isolation, consensus price forecasts appear to remain tethered to the ‘safe’ initial spot price [Ed’s Note: MCU references entirely RFC’s].

“This conservative bias in forecasting leads to an underestimation of price volatility and an, ultimately inaccurate, negatively weighted forecast distribution, in contrast to the far more volatile and positively weighted actual price performance of gold.”

Why do forecasts matter?

Forecasts are important, because it informs the value of gold operations and, in particular, future developments.

Low gold price expectations may make it harder for gold miners to raise capital at attractive terms from debt and equity funders.

They also influence the risk associated with hedging, typically required by debt funders to ensure they can recoup their investment when they bankroll an operation.

As spot prices rise, hedges move out of the money, leaving profits on the table and in the hands of bankers or offtakers. Given commodity prices tend to lift to some extent in lockstep with inflation, hedged gold production can easily become unprofitable.

“Hedging is a particularly high-profile manifestation of this, as not only a common requirement in project financing to reduce lender risk, but because the real-world impacts of it are obvious for all to see in company reporting of financial performance and position,” RFC says.

“However, given the consistent underestimation of gold prices, volatility, and the positive weighting of actual price performance, reliance on consensus forecasts for hedging decisions may prejudice project owners and increase their project risk (or least limit their upside exposure at best) rather than reducing it.

“This effect would be especially pronounced in operations that faced underperformance or cost escalations, particularly if coincident with rising gold prices where buying contracted ounces to deliver into a hedge is beyond the company’s financial capacity.”

Price forecasts appear to be getting more bullish. The initial days since the election of Donald Trump in the US have brought a rally in the US dollar and coincident tail off in bullion prices, falling from pre-election highs of almost US$2800/oz to US$2550/oz around a week ago. They’ve already rebounded by ~US$120/oz to US$2676/oz.

And a range of forecasters – from typically conservative retail banks like Commonwealth, to corporate advisors and stockbrokers like Argonaut, Shaw and Bell Potter, to big investment banks like Goldman Sachs and Bank of America Merrill Lynch – all think US$3000/oz is on the cards in 2025.

“Anchoring Bias, has in particular, led to forecasts that remain tethered to initial spot prices, failing to adequately account for the positive weighting and volatility evident in actual gold price performance over time. This shortcoming is potentially especially impactful given the wide use of consensus forecasts in both public and private sectors, and the influence that it has on decision making,” RFC says.

“Our analysis suggests that the forecasting industry may benefit from refining its approach to gold price forecasting. By adopting improved methods and critically evaluating past forecasts, forecasters could build more resilient strategies for pricing, hedging, and long-term planning, ultimately enhancing the value of gold investments and operations across the industry.”

Read the full, interesting, but Marvel-heavy report here.

Winners & Losers

Here’s how ASX-listed precious metals stocks are performing:

Arika Resources (ASX:ARI)

$17-million capped Arika, formerly known as Metalicity, has been following up high-grade results from drilling at the Pennyweight Point prospect, part of its Yundamindra project in WA’s northern Goldfields.

The project was, until earlier this year, covered by plaints that made exploration tough to pursue despite the project boasting historic production of ~45,000oz at over almost 20g/t gold, the sort of thing modern day miners like to peruse to see if the old timers left a hidden more valuable orebody beneath their old finds.

Stockhead spoke to ARI MD Justin Barton earlier this week as part of a special focused on the M&A activity lighting up its neighbourhood in the Laverton gold field as prices hit record highs.

“When we secured that tenure back in February we were really keen to get into that area because Yundamindra was within a stone’s throw of Sunrise Dam and Wallaby, which are obviously huge multi-million ounce resources that have been in production for 30 years,” he said.

“Yundamindra sits in a similar structural setting and has all the ingredients that it could potentially be the next significant discovery in the area.”

READ: Everyone wants a slice of WA’s Laverton gold field, and these explorers are hunting the next major discovery

Catalyst Metals (ASX:CYL)

All quiet on the announcement front, but Catalyst is a fairly pure play on the gold price given its production rate is in the sweet spot where gold prices make a big difference to its overall value proposition.

James Champion de Crespigny’s CYL produced 27,991oz and sold 29,920oz from its Plutonic mine in WA and Henty operation in Tasmania in the September quarter and is seeking to ramp up from a run rate of 110,000ozpa to 200,000ozpa in the years ahead.

The miner, previously an explorer focused on the Victorian Goldfields, has timed its M&A push well. Its takeover of Canadian-listed Superior Gold, previous owner of the once Barrick and Northern Star run Plutonic gold mine near Meekatharra has led to a 300% rise YTD.

Once a small cap, the gold producer now boasts a market cap of ~$730 million.

At Stockhead, we tell it like it is. While Arika Resources is a Stockhead advertiser it did not sponsor this article.

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