Gold prices to hover around $1,200/oz mid-June - Natixis

Bernard Dahdah, Research Analyst at Natixis, explains that in their view, the market has already factored in most of the Fed’s June rate hike, and they see gold prices hovering at around $1,200/oz mid-June. 

Key Quotes

“In addition to a further rate hike in September, we expect that the ECB will announce tapering that same month which should add further pressure on gold.”

“Despite our bearish views on gold prices, we have revised slightly higher our average forecast for the year as a whole so as to take into account the weight of the North Korean and US geopolitical tensions.  In addition, we have become more optimistic on Indian demand for gold as we expect GDP to continue growing steadily. The IMF expects Indian growth to be at 7.2% in the current fiscal year and to rise to 7.7% in the next one.  As such, we see gold prices average $1,185/oz in 2017.”

“Looking into 2018, we see gold prices hitting their lowest during the first quarter of 2018, after which we expect a very slow increase in prices due to lower mined output.  Since the collapse in gold price back in 2012-13, sharp cuts in producer CAPEX will start materialising in lower output by the end of this year.  That said the increase in prices is expected to be weighed down by higher rates in Europe and the US.  We see gold prices averaging $1,130/oz in 2018.”

“Silver

Silver prices are expected to remain closely correlated with gold and go through the same price path as the latter.  The gold silver beta is currently at 1.28 indicating that for a 1% move in gold, silver moves by 1.28%.  As opposed to gold, we do not expect for silver mined output to drop as the metal is mainly a by-product.  This mainly explains why we expect for a sharper drop in silver than in gold.  We see silver prices averaging $16.2/oz this year and $14.1/oz in 2018.”