Gold price could depend on equity strength this year – INTL FCStone

Otmane El Rhazi from The Bullion Desk.

The price of gold this year will depend heavily on the strength of equities, INTL FCStone analyst Edward Meir in his yearly forecast report.

The broker sees the yellow metal trading in a $1,000-1,350 range in 2015, with the lower end being reached if equity markets do well and if the dollar remains on an upside trajectory.

Gold was last at a steady $1,208.20/1,209.10 per ounce, with the dollar currently around a nine-year high against the euro at 1.176.

Investment flows are unlikely to provide much support this year because buyers in this space usually like to pile in when prices are moving higher, Meir said.

“Having said that, rallies towards $1,350 could materialise in the event of a sizable equity correction or some sort of ‘credit’ event,” he added. “The latter could include problems with dollar-denominated Russian debt, high-yielding US energy paper, or Chinese bonds.”

Renewed problems in the eurozone in the wake of the forthcoming Greek elections could also spur gold higher although INTL forecasts the Greek electorate to return the current administration to office.

“Going into the New Year, it is hard to make much of a case for gold, as a number of variables will again be arrayed against it. First, the current collapse in oil prices will reduce inflationary expectations and delegitimise the argument of holding gold as a bulwark against inflation,” Meir said.

Despite falling inflationary expectations, though, there is widespread agreement that the US Federal Reserve will raise interest rates given that the US economy is growing too strongly to justify a seventh year of zero interest rates.

“This should keep the dollar’s upward trajectory intact and pressure gold prices further,” Meir said.

In addition, with interest rates remaining low, US equity markets should remain fairly well bid, further reducing investment flows into gold, he added.

INTL forecasts a $13.50-20.00 trading range on silver, suspecting that the metal will be more vulnerable than gold to the malaise in global industrial demand, although an expected supply deficit should offer a measure of support.

It expects platinum to trade between $1,085 and $1,400, while palladium could range between $650 and $880. Palladium is more attuned to the stronger Chinese and US automobile market, while platinum is struggling with a recovering European auto sector, Meir pointed out.

(Editing by Mark Shaw)

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