So, do you want to know what some big banks think the price of physical gold will be in 2012? Here are three views that all were expressed in yesterday's early hours: (1) Barclays Capital - U.S.$2,000 average, (2) Goldman Sachs - U.S.$1,810 average, and (3) UBS - U.S.$2,050 average.

As you know if you read these e-mails, I believe that any forecast of the physical gold price is a forecast on the world macro-economic and political condition at a given point in time. Accordingly, as I reflect on the current gold price and these three 2012 price estimates - which for all intents and purposes are broadly in the same 'ballpark' - I have reached the following views with respect to them:

• First, generally speaking, assuming analysts get their underlying facts right and their assessments of prospective macro-economics and political matters in good balance, I think their estimates generally tend to be on the conservative side. I think this whether they are forecasting the gold price, the silver price, or generating a 'target price' on a company's shares irrespective of industry sector. It follows that I believe that if the analysts who generated the physical gold prices for these three banks got the macro-economic and political conditions through 2012 'right', then I intuitively believe their 'real' 2012 gold price forecasts may be lower than they really believe in their respective 'heart of hearts' the think the gold price will be in 2012;

• Second, if they didn't get the macro-economic and political conditions through 2012 'right', then as far as I am concerned any forecast of the 2012 physical gold price they generate either yesterday or at any other time is meaningless, and should be disregarded. The problem is, of course, that based only on the article referenced below, there is not enough detail in my view to determine whether the Bank analysts have those things 'right'. The underlying macro-economic and political conditions through 2012 adopted by the analysts when determining their physical gold price forecasts that are set out in the article are for me:

• too general, and are not attributed to specific analysts or banks,

• incomplete - they include only a view or views by (I assume) the various bank analysts that 2012 will be an environment of (1) negative real interest rates, (2) continued Central Bank gold purchases, (3) a possible Eurozone breakup, (4) possible currency devaluations and risk of related 'big inflation' without reference to which currencies are at greatest risk (which 'big inflation' reference strikes me as being inconsistent with an assumption of 'negative real interest rates'), and (5) "re-hypothecation and the serious risks that a massive period of deleveraging poses to the financial and economic system is likely to be a very important factor in 2012 which will lead to heightened volatility";

• Third, I am particularly taken by the foregoing comment with respect to re-hypothecation and attendant related risk of financial system deleveraging. I commented on re-hypothecation just last week - see 'MF Global and Re-Hypothecation' (December 12 - reading time 10 minutes). I am increasingly thinking that re-hypothecation and what I think is the related topic of 'derivatives' is a potentially huge 'overhang risk' to the world financial markets. To the extent I am right, and one or more of the bank analysts from the three Banks who made these gold price forecasts took that risk into account, I don't see any way to assess how much they have impacted that risk in their gold price forecasts; and,

• Fourth, following from the foregoing, I see these three bank forecasts as little more than interesting observations.

The foregoing is an example, for what it is worth, of how I generally think through the things I read and listen to. You may not agree with the way I look at things, but nonetheless it may give you some 'food for thought' with respect to your own 'thought process' as you do your own reading and listening.

The article yesterday that set out the three Bank forecasts referenced in this commentary is titled '2012 Gold price to be 28% more than current levels'. The article was published on the CommodityOnline Blog - reading time 2 minutes.