Splitting the Difference in Gold Analysis
GFMS: "We believe that the recent price rally will prove to be short-lived, and once current market turbulence starts to ease we are likely to see the price retreat again."Metals Focus: "The change in investor sentiment seen in the first quarter is more likely to solidify than melt away in the months ahead."
- US interest-rate policy and expectations were the key driver of Dollar gold prices in 2015, and will be again in 2016;
- Investor sentiment is what actually moves the price higher or lower, and the turnaround so far in 2016 has been remarkable;
- Gold mining output rose to a new peak in 2015, but whether it now slips (GFMS) or plateaus (Metals Focus) it will not grow. There simply isn't the money or ability to boost production anytime soon;
- Hedging by miners wanting to lock in current prices has popped higher on the price jump, but remains small and project-focused, rather than marking a change of strategy;
- Russia and China ate the lion's share of central-bank gold demand last year, and they show no signs of stopping;
- Asian demand so far in 2016 has been weaker, but the underlying fundamentals of supply and demand are improving, and the impact on prices will show sooner (Metals Focus) or later (GFMS).
Metals Focus: "We should see the physical markets furnish gold with a higher 'price floor'...[although] this may not be immediately apparent."GFMS: "The forecast reduction in global mine supply and a gradual recovery in demand will see the physical surplus narrow in 2016, providing support to the gold price and laying the foundations for better prospects."