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Silver prices to bounce back to $18 an ounce by the end of 2019: ABN AMRO

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NEW YORK: Sentiment in the gold market has been pretty dire lately as the price has been unable to push above $1,200 an ounce, but one firm sees potential for higher prices for gold and silver through to 2019.

In a report published Tuesday, Georgette Boele, coordinator of foreign exchange and precious metals at ABN AMRO, said that her team is keeping the faith that precious metals markets have bottomed. The Dutch bank thinks silver has potential to rally even as it lowers its price forecast through the rest of the year and 2019.

In its updated forecast, the bank said that it expects silver to rally to $15.50 an ounce by the end of the year, down from its previous forecast of $16 an ounce. At the same time, the firm sees silver prices rising to $18 an ounce by the end of 2019, down from its initial forecast of $20 an ounce. Despite the downgrade, ABN AMRO’s forecast represents a gain of more than 7% from current levels. December silver futures last traded at $14.43 an ounce, up 0.50% on the day.

For gold, the bank has left its forecast unchanged as it sees gold prices rising to $1,250 an ounce by the end of the year and pushing to $1,400 an ounce by the end of 2019. The bank’s gold forecast represents a nearly 5% gain from current levels. December gold futures last traded at $1,192.40 an ounce.

Boele said that she expects that gold’s August lows and silver’s July lows to mark the bottoms in the precious metals space. Boele’s outlook comes as U.S. treasury yields, a significant headwind for precious metals, rose to their highest level in 7-years.

“Despite the recent weakness in precious metal prices, we expect prices to set a bottom above previous lows and to recover. We are of the view that the U.S. dollar has peaked across the board. We also expect that 10y US treasury yield will peak around current levels and that US economic growth will peak this quarter.”

Along with a weaker U.S. dollar and lower bond yields, Boele said that they see potential for a recovery in the Chinese yuan. The steps that the Chinese government to stimulate its domestic economy in the face of a growing trade war with the U.S. should help support gold prices, she said.

“We already see a stepping up of fiscal stimulus by the Chinese authorities, as well as a ‘tweaking’ of its financial deleveraging campaign. Against that background, we expect that the Chinese yuan will stabilize and recover. This should calm investors and improve investor sentiment towards precious metals.”

Although ABN AMRO is optimistic on gold and silver, the Boele warned that any escalation in the global trade war could pose further risks for the precious metal.

“There is always the possibility that prices could go lower. But we think the risk reward for entering precious metals positions is quite attractive,” Boele said.

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