Mixed outlook for Gold in 2017

By Morningstar |  09-12-16 | 
 

The gold price had a strong start to the year, rising to $1,237.90/ounce before March. By July, the yellow metal had soared to $1,365.40/ounce, as concerns about the impact of Brexit saw investors rush to the perceived safe haven.

However the gold price has subsequently fallen back to its February level around $1,172 per ounce. In part this is because the outlook for the U.S. economy has improved, as seen by the market pricing in a 96% probability of the Federal Reserve raising rates this month.

Commodity prices tend not to do well as the dollar strengthens.

Suzanne Hutchins, portfolio manager of the global real return team at Newton Investment Management

She believes that the recent strength of the U.S. dollar is not sustainable. “The US dollar is currently at about 14-year high, which I think it is a risk to the downside of the dollar. There are expectations for a couple of rate rises next year, so if that comes through the dollar would go down. And it would potentially be good for the gold price,” said Hutchins.

Source: Morningstar U.K.

IG’s Chris Beauchamp holds a different view.

Beauchamp forecasts the precious metals’ outlook for 2017 to be less promising; he expects gold prices to be drop below $1,000 per ounce by the end of the year. He suggests investor buy base metal over the precious metal for the time being.

“Even if inflation starts to pick up – a classic environment that favours gold – it’s likely the improving U.S. economy will take the lead on that and you will see gold heading lower,” said Beauchamp. “We will have a bounce in the short term but the gold price will remain weaker in the long term.”

Source: Morningstar U.K.

ABN Amro

Gold should slide to $1,100/ounce by the end of 2017 as the Federal Reserve tightens monetary policy, real Treasury yields increase and the U.S. currency rises. A price recovery should take place in 2018.

Source: Bloomberg

Citi Research

Trump’s victory in the U.S. presidential election has shifted U.S. dollar and interest-rate expectations higher. This points to a bearish gold outlook due to the inverse relationships between the markets.

The strong U.S. dollar outlook post-Trump and back-up in bond yields is the main driver of our bearish price outlook for 2017.

Supply fundamentals are little changed while demand hangs in the balance as Chinese and Indian retail trends are at an inflection point. In the absence of strong structural trends, we expect gold price pain before gains.

Citi sees gold easing to a second-quarter average of $1,135 before recovering to $1,180 in the final three months of 2017.

Source: Market Pulse

Credit Suisse

The 2017 forecast is $1,338/ounce.

Credit Suisse analysts see gold prices averaging $1,275/ounce in the first quarter and rising to $1,400/ounce in the fourth.

Source: Barrons

Jeffrey Nichols, senior economic adviser at Rosland Capital LLC

Gold is expected to move higher in 2017. There’s going to be a “surprising gold price increase” that could come within striking distance of its historic highs later in the year, based on monetary policies.

Of course, there will be contributing factors for the yellow metal to see a spike. One thing that will be a driving force is demand from China and India. “Both countries have significant cultural and social affinity to holding gold as form of investment and savings by many people in both countries but for different reasons,” said Nichols. “We think that’s going to continue.”

In that regard, Nichols stated that gold that goes to China and India is unlikely to come out again in any perceivable time frame, suggesting that this is a reduction in what he calls the “availables via gold that is available in the market place.” When westerners get revved up again about gold and there’s an adequate supply, there’ll be higher gold prices, he said.

“The panics of the gold market rely importantly on the idea that Asia is going to be a continuing buyer of gold,” he added. “That gold is very likely to get some strong hands and isn’t likely to come out except at much higher prices.”

Source: Investing News

David Morgan, analyst at Morgan Report: 2017 will definitely see a lift throughout the year. It won’t be straight up, ebb and flow, but will overall be higher in 2017 than 2016.

Jeffrey Christian, managing partner of the CPM Group: Expects gold to average $1,325 per ounce in 2017 before increasing significantly beyond 2017.

Scotiabank and Societe Generale: Forecasts an average $1,300/ounce in 2017.

Focus Economics: Average at $1,297/ounce in 2017.

Source: Investing News

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