Gold prices to remain below $1,900 through 2022 - Haywood Securities
(Kitco News) - The gold market remains in a long-term uptrend. Still, it needsto get through its current consolidation period, according to one investmentfirm.
In a report published Tuesday, analysts at Haywood Securitiessaid they are lowering their price targets for this year through 2022 butexpect to see higher prices past 2023.
Looking at the updated forecast, Haywood analysts see gold pricesaveraging the year around $1,800 an ounce, down slightly from the previousestimate of $1,815. For next year, the firm sees an average gold price ofaround $1,850 an ounce, down from $1,900. However, by 2023, the analysts saidthat they see prices averaging around $1,900 an ounce, up from the priorestimate of $1,800 an ounce.
The analysts said that gold faces some challenging headwinds froma stronger U.S. dollar and rising bond yields in the near term. Bond yieldshave pushed higher as interest rate expectations have picked up. Markets currentlyexpect the Federal Reserve to tighten monetary policy, which includes reducingtheir monthly bond purchases before the end of the year and potentially raisinginterest rates as early as June.
However, looking at the bullish elements, the analysts said thatslowing growth and rising inflation create a positive environment for theprecious metal.
"With growth slowing and inflation moving higher, we areconcerned that China and the broader global economy could be set forstagflation," the analysts said in the report.
"Historically, gold has fared well in stagflationenvironments as higher inflation and market volatility support capitalpreservation and lower real interest rates support opportunity cost and growthrisk motives. We believe the precious metals complex is in a long-term uptrend,and longer-term macro-economic factors remain constructive. Nevertheless, gold remains a tangible, fungible, and durable store of value," the analysts added.
The comments come as the gold market continues to struggle toattract sustainable bullish momentum and remains trapped below $1,800 an ounce.December gold futures last traded at $1,792.70 an ounce, down 0.78% on the day.
Although gold prices could struggle through 2022, Haywoodanalysts continue to see solid value in the undervalued mining sector.
"The mining sector is trading at historic lows relativeto gold and the broader market in general despite strong fundamentals offeredby the sector, including market sector leading free-cash-flow yield of around 6.85%,"the analysts said.
The firm said that they continue to focus on organic growth valuewithin the mining sector. Their top picks in the intermediate junior producerspace are Endeavour Mining (TSX: EDV), Equinox Gold (TSX: EQX) and K92 Mining(TSX: KNT).
Meanwhile, the firm'stop picks in the exploration development space include Filo Mining (TSX.V: FIL)and Osisko Mining (TSX: OSK).
By Neils ChristensenFor Kitco News
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