NEW YORK (Scrap Register): The Canadian investment bank, TD Securities looks for gold prices to average $1,313 an ounce during the year 2018.
TD Securities’ quarterly average forecasts show that analysts expect prices to average $1,300 an ounce during the first two quarters of the next year and $1,325 an ounce during the last two quarters.
The uncertainty surrounding the Fed's leadership and future monetary policy knocked gold, silver and platinum off their highs and continues to keep the complex from breaking out higher at the current time — as traders focus on the risks of hawkish monetary policy.
As such, the price action for gold and its peers has been of the range bound variety of late ($1,265/oz - $1,300/oz).
Balance sheet reductions, likely Fed hikes in December and mid-2018, stellar equity markets and uncertainty surrounding the Fed's new leadership will all likely continue to conspire to place a ceiling above precious metals for the balance of 2017.
The hope that the Trump Administration will eventually be able to pass a robust tax reduction legislation, which could accelerate economic growth and possibly lead to a higher than anticipated interest rate environment and still firmer equity markets, are an additional set of factors limiting the upside for gold and its peers.
The relatively firm US dollar and higher rate expectations in late-2017 will very likely keep both the carry and opportunity costs to hold zero-yielding assets such as gold, silver and platinum elevated, as the US central bank reduces monetary accommodation from record levels.
In sharp contrast to the near-term, the USD is expected to aggressively weaken starting next year, which has traditionally been a mana for the precious complex.
The expectations the Fed will start approaching the end of its tightening cycle just as other central banks consider unwinding their uber-easy policy should be the key catalyst responsible for the greenback's weakness next year.
In addition, based on the recent Fed trend of continually dropping its dot plot estimates and ongoing concerns that their models may be misspecifying inflation, there is a good chance that the world will get less than the four rate increases cited by the dots by the end of next year.
Indeed, technological changes and the wide use of online shopping, telecommunications and entertainment platforms, cost reductions and precarious employment trends may continue to prompt markets to believe that wages and inflation will be contained.