A week in gold: Flat price outlook for 2015 says consensus


Gold’s 9% rise this year has been a pleasant surprise for the metal’s fans, but gains from here may be harder to achieve.

So says the majority of 31 gold analysts who provided forecasts in the annual London Bullion Market Association (LBMA) survey.

The gold price will remain broadly flat in 2015 according to the survey, which is likely to mean the metal is outperformed by its precious metal neighbours, silver, platinum and palladium.

Over the year the consensus average price is $1,211/oz, with the average range $1,085 to $1,356.

That 20% difference between top and bottom is not that huge and, unsurprisingly, the themes mentioned by the respective analysts are also similar.

Potential drags on the price include a further strengthening in the US dollar, interest rate hikes by the US Federal Reserve in the second half of 2015, quantitative easing in Europe and worsening deflation that undermines gold’s role as a hedge against rising prices.

On the bullish side is the possibility that retail demand from China and India picks up, though central bank buying is not seen as having a major influence.

Ross Norman, of Sharps Pixley, is the most bullish analyst with his average forecast of $1,321 per ounce while Adam Myers, from Credit Agricole, is the most bearish at US$950.

Norman admits he is going out a limb with his prediction, but says a lot of things such as rising US interest rates should be in the price already.

He sees see weak economic growth prompting central banks to fight deflation by resorting to inflationary pressures in the second half of the year.

 As a result, the outlook for gold in emerging currencies may be even better than in dollar terms as investors insure or hedge against currency debasement.

This should mean good physical gold demand and also investor flows returning with a “vengeance, aided by short covering and fresh longs in the futures markets.” 

On the other end of the see-saw is Credit Agricole’s Myers who sees gold trending gently downwards over the rest of the year unless there is a eurozone exit or unexpected Asian shock.

“Against a backdrop of largely unchanged production, lower reserve purchases by Central Bank customers and further position lightening within private investor portfolios will continue to be the primary drivers in the year ahead.”

 “Reducing gold-producer hedging will only prove a secondary impact, with most programmes having been already actively undertaken at higher prices in 2014.“

Finally, Matthew Turner at Aussie bank Macquarie is going for an average close to the current spot price at US$1,255.

Like Norman, he says a rise in US interest rates should be priced in as gold has sliding for nearly two years in preparation.

So, any negative reaction is likely to be short-lived as investors realise US rates aren’t going to rise anywhere near as much as they fear.  

“This should – though here is a key risk – limit further dollar appreciation.“

Prospects appear better for Indian and Chinese demand, but are in worse in the Middle East. Mine supply is supported by weaker producer currencies, but the growth years look over, he said.

“Put it together and we expect a price not dissimilar from 2014’s, but with a stronger finish.”

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