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Year-end forecasts both fun and humiliating

Harper looks at his forecasts for bullion values in 2006.

Would I choose to write about gold if I weren?t doing reasonably well at forecasting its price? Absolutely. Gold is hot. Readers want to know about it. The fact that for the second year running my year-end price forecast is in the ballpark is just gravy.

Besides, if I need a dose of humility, all I have to do is look at my silver forecast and my guess for the Dow Jones Industrial Average. They did not fare as well.

It has been a tradition in this office to make price forecasts at the end of each calendar year since retired Coin Market editor Bob Wilhite and I started it in 1978. At the beginning, it was informal and between just the two of us. We traded bragging rights back and forth. As the years went by, we opened it up to other staff members, and this year I have five staff forecasts on my calendar for Dec. 29. What hasn?t changed is the prize: bragging rights here in Iola, Wis.

When bullion is worth writing about, I share the forecasts with readers. That said, let?s jump right in.

To create a baseline, let me give you the closes from the last business day of 2005. Gold closed out the year at $517.10 a troy ounce. Silver was $8.82 a troy ounce. The Dow Jones Industrial Average was 10,717.50. Remember, my columns are written before the last business day of the year, so price fluctuations can change outcomes. These numbers are compiled as of Dec. 18 so that they can be included in the Jan. 2, 2007, issue.

My gold forecast for the close of 2006 is $650. As of Dec. 18, it was $614. If the forecast had been for the end of November, I would have done even better. On Nov. 30, the price was $646.90. The high point, May 11, was $719.80. I even wrote a column then to point out the jet-powered advance that was then occurring.

I intended to take my lumps with silver. I forecast $11. The closing high for the year so far was May 11 at $14.846. However, I think I will take modified lumps because market fluctuations seem now to hold out the hope that I could still prove to be right. In two days, silver has dropped from $13.785 to $12.382 an ounce. At that rate, $11 is easily attainable and then some. However, if the market takes us that low, my gold forecast is likely to be further from reality.

Then there is the Dow Jones Industrial Average. Why do I bother to include the number in a coin newspaper? Good question. It certainly isn?t to make me look good. I will simply plead that it is one of the numbers the staff members are asked to name in our internal forecasts.

So, as I swallow hard, here we go. I forecast 14,000 for the Dow. As of Dec. 18, it was 12,441.27. Call me an optimist. I did get the direction right, but being more than 1,500 points short of my forecast, I can?t even claim honorable mention.

Those are my numbers. Other staff members were both more optimistic or more pessimistic than I, depending on the category. For gold, the high forecast was $850, which looked pretty good in May. The low was $540.

For silver, our most optimistic staff member said $15. That also looked darn good in May. The most pessimistic picked $8.90.

For the Dow, I had the honor of being the most optimistic. On the pessimistic side we had a 10,500 forecast.

Considering what the year 2006 has been, all of the forecasts were pretty much within reason save perhaps for my Dow forecast. The next most optimistic person was only brave enough to say 11,500, nearly 1,000 points below where we currently are.

The only thing left to do now is to change the subject to next year. What will the numbers be at the close of 2007?

I don?t see gold at $1,000 an ounce or at $500, but I don?t see much room for continued growth over the next 12 months. I pick $600. For silver, I pick $12. With the Dow, I am more optimistic. How does 15,000 sound?