Deutsche Bank A.G. (NYSE: DB) has joined a growing list of investment banks cutting their forecasts on precious metals for 2013 and 2014. By cutting their estimates for gold and silver and joining a growing Wall St. chorus, does this bring out a red flag for investors, or is this a typical Wall St. reflex after a sustained rally and pullback?
In what appears to be very large front-end cuts to 2013 pricing for both metals, Deutsche Bank lowered the 2013 forecast for gold by 12.1% per ounce to $1,856 per ounce. The 2014 estimate was cut by 5% to $1,900 per ounce. Gold closed yesterday at $1,646.30 and is trading up $5.90 today on the February contract at $1,652.20.
Even though the cuts look large, could this be a good entry point for investors? From these levels that still would provide upside of more than 12%. The SPDR Gold Shares (NYSEMKT: GLD) ETF closed yesterday at $159.43, down from a 52-week high of $174.07. A move to the Deutsche Bank target for 2013 could create a new 52-week high at $178.56.
This might also provide a solid entry point to large gold-mining companies. Barrick Gold Corp. (NYSE: ABX), with 27 operating mines around the world, may be a solid pick. It closed yesterday at $34.09, very close to the 52-week low of $31. This compares with a high of $50.39 in the past year. The Market Vectors Gold Miners ETF (NYSEMKT: GDX) provides a way to invest in a large basket of gold-mining stocks. It closed yesterday at $44.48, down from a 52-week high of $57.94
The cuts at Deutsche Bank for silver were even larger. The 2013 price was lowered by 16.8% to $37 an ounce, while the 2014 forecast was lowered 5% to $38 per ounce. Like the cuts for gold, this may seem like a negative call, but does this really provide an opening for investors?
Silver closed yesterday at $30.082. Again looking at the lowered targets, that still seems to provide tremendous upside. The iShares Silver Trust (NYSEMKT: SLV) closed yesterday at $29.18, well off its 52-week high of $36.44. Silver Wheaton Corp. (NYSE: SLW), a premiere silver mining company, closed at $34.60, more than 20% below its 52-week high of $41.30.
With growing industrial demand as a backdrop for silver pricing, and central banks printing enormous amounts of money supporting gold, this may be an excellent entry or reentry points for investors looking to hedge and diversify their portfolios.