Bank Analyst Price Predictions a “Self Fulfilling Prophecy”?

Dr. Jeffrey Lewis, editor and publisher of, published an article in which he questions the silver and gold price predictions from analysts at large investment banks, commenting that such outlooks ”become focal points for a sector and often seem to carry with them some form of self fulfilling prophecy.”

As quoted in the market news:

Goldman Sachs’ recent bearish view of gold is a case in point among a series of predictions.

The most recent prediction lower was made on the grounds that Treasury Inflation Protected Securities (TIPS) would put pressure on gold as an alternative. Watching the TIPS would create insight on future price direction.

A Treasury Inflation Protected Security is a bond which increases its principal upwards by the same amount as the rate of inflation (as reported by the Consumer Price Index). The average annual return on TIPS since its inception 10 years ago has been about 5.4%.

The point is this: The calculation method for the CPI is flawed and will always understate the true rate of inflation. Adding such a CPI figure to the anemic nominal TIPS yield will never allow investors to get ahead in real terms. Unlike TIPS, gold offers no guaranteed rate of return, but a rational investor would rather have the millennia of history validating gold as an excellent hedge against inflation rather than a return benchmarked versus the Consumer Price Index.

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