Gold News

Gold Prices 'Will Fall in 2017' Says Top Forecaster as US Fed's 'Close Call' Weighs on Stocks

GOLD PRICES held right at last week's closing level in London trade Thursday lunchtime, as Asian and European stock markets extended yesterday's slip in US equities following publication of minutes from the Federal Reserve's latest "no change" interest-rate meeting.
 
Amongst the 7-in-10 voting members backing "no change" on 21 September, "several stated that the decision was a close call," the minutes said, but were swayed by comments widely assumed to have come from Fed chair, Janet Yellen.
 
"The economic expansion has plenty of room to run," said New York Fed President William Dudley in a speech Wednesday, justifying the hold at 0.5% and repeating a phrase used by Yellen in her post-decision press conference last month.
 
New data released at the start of US trading today put jobless benefits claims in the world's largest economy at a fresh 42-year low for last week.
 
Commodities prices slipped but silver prices held steady, trading just shy of unchanged for the week so far at $17.48 per ounce.
 
"As the US economy continues to steadily improve, so will the Fed raise rates," says a new note from French investment and bullion bank Natixis' precious metals analyst Bernard Dahdah.
 
"Higher rates and yields increase the opportunity cost of holding gold...[and] we see the share of investor [gold] demand returning to 8% of the total" – the pre-2008 level, well below the 2012 peak of 23%.
 
The best gold price forecaster in trade body the LBMA's 2015 survey, Dahdah now cuts his average 2016 forecast $20 per ounce to $1256 from the sharp upwards revision of July, made after the metal rose steadily from a 6-year low of $1045 last winter, jumping to reach $1375 in the wake of the UK's Brexit referendum shock this summer.
 
Dahdah had initially predicted gold would fall below $1000 by April 2016.
 
"We see prices averaging $1180 in 2017 and then dropping to $1100 in 2018," Dahdah goes on, with Chinese demand failing to rebound "unless gold prices collapse" while Indian demand is seen rising only "mildly" as the No.2 consumer nation's high import tariffs "continue weighing" on demand.
 
Shanghai Gold Exchange volumes rose Thursday and the premium above London spot prices jumped to almost $6 per ounce at the SGE's daily benchmark fixing, well over twice the typical incentive to importers.
 
With India's gold imports already 60% lower in 2016 year-to-date however, gold sales in its western state of Maharashtra were poor on Tuesday's Hindu festival of Dussehra, the Hindustan Times reports.
 
Ahead of the key Diwali festival and wedding season at the end of this month, "Gold prices are highly prohibitive," says Mumbai Jewellers Association vice-president Kumar Jain, with "many buyers postponing their purchases."
 
Asian stock markets closed Thursday 0.8% lower overall after new data said China's trade surplus shrank by nearly one-fifth in September from August, with exports down 10% and imports down 2%.
 
Fixing at a 3-day high of $1258 per ounce, London's benchmark gold auction again saw prices cut before finding a balance of buying and selling Thursday morning, with the quantity offered for sale again holding firm as the quantity wanted rose sharply on slightly lower suggested prices.

Adrian Ash is director of research at BullionVault, the physical gold and silver market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and is now a regular contributor to many leading analysis sites including Forbes and a regular guest on BBC national and international radio and television news. Adrian's views on the gold market have been sought by the Financial Times and Economist magazine in London; CNBC, Bloomberg and TheStreet.com in New York; Germany's Der Stern; Italy's Il Sole 24 Ore, and many other respected finance publications.

See the full archive of Adrian Ash articles on GoldNews.

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