Firm forecasts price of gold

Know what the price of gold will be in a year or 18 months’ time? You don’t have a clue? Well, Martin Murenbeeld thinks he does.

Mr Murenbeeld is president of M. Murenbeeld & Associates Inc., a Toronto company which provides analytical services, advice and consultation in the areas of precious metals and international financial markets.

A former mathematics student who took his Ph.D. at Berkeley, Mr Murenbeeld entered his current line of work in the late 1970s, when a report he had written on foreign exchange caught the attention of a Canadian gold-mining company. He then started to develop similar analyses for gold.

“We try to bring logic to the whole notion of the gold market and gold-price forecasting,” he told The Northern Miner in an interview.

Among his regular mailings to corporate clients are the Gold Monitor, a weekly report augmented with a personal computer model which reviews and monitors gold- price developments, and the Quarterly Gold Report, a comprehensive review which develops three scenarios of gold-price developments using econometric analysis.

Among the part-time university professor’s clients are some of Canada’s leading mining companies, as well as firms in the United States and Australia.

The weekly models are set up for calculation of the gold price on an hourly, daily and weekly basis through the input of concurrent information on other markets, including the foreign exchange market, the U.S. money market and commodity markets.

Designed for use in a personal computer, the models relate gold- price movements to other economic and financial developments and show how gold-price fluctuations are usually the natural result of these developments.

In other words, the weekly models provide a straight monitoring of events.

Troubles in South Africa during the second half of 1986, Mr Murenbeeld said, were calculated to have contributed almost $70 for brief periods of time to the price of gold, while Brazil’s debt problems earlier this year caused a peak gold- price jump of only $10.

The quarterly models track the average price of gold over 3-month periods and relate this price to international financial and economic variables including foreign exchange rates, oil prices, general inflation levels, gold and international money supplies, real interest rates and economic output.

“My theory that gold-price movements conform to general international economic and financial trends is underscored by the statistical fact that these factors explain upwards of 99% of gold-price fluctuations,” he said.

Mr Murenbeeld, who admits to having been bearish on gold until 1985, then uses the quarterly analysis to forecast the price of gold for the next 12 to 18 months under a scenario format.

So what does he see happening to gold prices in the not-too-distant future?

His “most likely” projection (from his December, 1986, outlook) sees gold trading more sideways than upwards for most of this year, before continuing its long run upwards in 1988. Under this scenario, gold will reach almost $430(US) per oz during the fourth quarter of this year, and $441 during the second quarter of 1988.

He doesn’t foresee the price of gold hitting $500 this year under this scenario unless the political situation flares up on several fronts, with South Africa, the Mid-East (anything to do with Iran), Pakistan, Mexico (debt problems) and the Philippines mentioned as areas of ongoing concern.