NEW YORK (Scrap Register): Gold prices are expected to average $1,245 an ounce this year and $1,303 an ounce in 2018, said RBC Capital Markets in a report. The bank sees a recovery after the tumble in prices that has occurred since the U.S. presidential election.
According to RBC, Gold’s nosedive after the election has given us a clean base from which to start the year. This leaves room for seasonal drivers to breathe some life back into the yellow metal as we march through the first two months of the year.
Analysts at RBC said they are cautiously constructive for the year. From this new base, we have re-profiled our quarterly forecasts with a mostly upward trajectory to account for the cleaner starting point. Yet, even with this change in trajectory, our full-year annual average forecast has changed only marginally, now at $1,245 an ounce, versus $1,241 an ounce previously.
A partial recovery in jewelry demand, higher bar and coin purchases, and an uptick in central-bank buying should make up for the weaker exchange-traded-product flows and a continuing downtrend in industrial and dental demand, RBC said.
Still, RBC said a number of factors should keep a lid on gold. The dollar will likely remain strong, the Fed has and will likely raise rates further, and U.S. equities should at least hold up well.
Even if any of these key factors end up weaker than market expectations, they will likely remain headwinds for gold, limiting the extent to which the yellow metal can rally from current levels.
“That said, upside risks to this forecast include a number of binary ones, namely politically driven factors and larger economic unknowns, such as how new economic policies under the new U.S. administration take shape, how shifts in U.S. security policy and international relations change global risk appetite, and lastly, the possibility of trade wars. On the downside, if developed market equities outperform bullish expectations, gold would likely be exposed to further weakness both directly and indirectly,” said RBC.