FastMarkets analyst William Adams is mildly bullish on gold this year, he said in his yearly forecast, because of a host of geopolitical risks and an over-extended dollar.
The gold price will average $1,252 per ounce in 2015 between a high of $1,292 and a low of $1,172, he said. The yellow metal was last around four-month highs at $1,276.20/1,277.10.
“The drivers in the gold market have over the past two years switched from institutional investor interest to physical demand from fabricators and investors in bars and coins,” Adams said. “During this period, confidence in the financial system has been restored while safe-haven demand has fallen. With equity markets setting all-time highs, the opportunity cost of holding gold has increased.”
Still, there is organic growth in retail demand in China, he added while equity markets might struggle or correct and should quantitative easing in Europe fuel demand for small bars and coins.
“As well, we feel gold prices will benefit from a pullback/consolidation in the dollar, which may have run ahead of itself given that the Federal Reserve seems in no hurry to raise rates, which is not surprising given the weak global growth outlook,” he added.
Adams sees silver, which was last trading at $17.66 per ounce, averaging $17.63 this year between a high of $18.80 and a low of $15.71.
Silver has returned to the range that was in place in 2006-2010 before the steep rally that started in late 2010, which ran up to highs near $50.
“Much of the excess speculation has therefore been washed out of the silver market, we feel, which means it should trade its fundamentals more, with noise coming from the gyrations at the fund end of the spectrum,” he said.
Industrial end-users may be in no hurry to restock given the weak economic outlook but, with investment in the solar-power industry on the rise and likely to be fairly inelastic to economic growth, Adams expects investor interest to remain committed – this should allow silver prices to follow gold higher.
In the PGMs, platinum was forecast to average $1,282, with a high of $1,407 and a low of $1,193 – it was last at $1,259/1,269.
Platinum has recently been trading at parity to gold, Adams said, but there is upside potential in the former given platinum’s significant industrial use as well as its jewellery use and expectations for a supply deficit again this year
“Chinese retail/investment demand for the metal will do well when platinum is trading close to gold prices. The slowing auto market in Europe and platinum’s continuing loss of market share in diesel autocatalysts are negatives but we generally feel the bullish fundamentals will prompt restocking once the current turmoil in the wider commodity market settles down,” he said.
Palladium will average $860 this year, he predicted, trading in a range of $768-990.
With the market expected to be in another supply deficit, Adams said he would not be surprised if continuing investor interest competes with industrial demand. Indeed, if the market concludes that the downward trend in gold is over, confidence in precious metals per se could well see investor interest in palladium tighten the fundamentals further.
Adams placed second in the gold forecast for 2014 in the LBMA’s annual precious metals survey in 2014.
(Editing by Mark Shaw)
The post Gold to average $1,252 in ’15, silver $17.63 – FastMarkets’ Adams appeared first on The Bullion Desk.
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