Bullish gold investors expecting record gold prices in 2013 have, so far, been mightily disappointed.
For the first four months of 2013, gold prices have fallen more than 15%, and according to a BMO report, gold has slid 25% from its peak reached in 2011.
Silver prices have followed gold's price trajectory downwards, falling 7.5% in the first three months of 2013 near last year's low, and more than 40% below silver's 2011 price peak, according to data from the Silver Institute.
The potential reasons for the price corrections in recent weeks are varied, ranging from concerns over potential gold sales by Euro-area countries to divestitures associated with investors of exchange-traded funds (ETFs) and speculative traders on the futures markets.
Whether investors will return to buying the precious metals will depend largely on their views on the prospects of various elements of the global economy. But some Canadian analysts aren't as bullish as some U.S. and European counterparts. A BMO commodities report is forecasting gold to remain below $1,600 per ounce, averaging $1,557 per ounce in 2013 and $1,524 per ounce in 2014.
It's forecasting silver to trend lower over the next two years to an average price of $28.72 per ounce in 2013 and $27.02 per ounce in 2014.
A CIBC analyst report is expecting gold to remain around $1,500 per ounce in the medium to long term.
While such prices are well below its peaks in recent years, they are expected to keep many Canadian-headquartered gold and silver producers financially stable. According to a separate BMO report, most gold and silver companies in Canada have strong cash positions, which would help address any capital needs for various projects.
That's some good news for the sector, which has seen gold and silver stocks plummet nearly 40% this year. The S&P/TSX Global Gold Index itself had fallen more than 35% as of last week.
Concerns, however, will grow if precious metal commodity prices don't improve. The BMO report noted that if prices fall significantly below its forecast, some companies would need to curtail its capital spending to save cash, while others may have to cut their dividends.
