LBMA's Forecasters Are Modestly Bullish on Gold. And You? / Commodities / Gold & Silver 2019
The LBMApublished its annual forecast survey for precious metals prices in 2019. Gold pricesrange from $1,150 to $1,475. Who is right?
Gold Prices WillModestly Increase
As oneyear ago, the views of 30 precious market analysts in this year’s forecasts arestrongly divergent. The average price of gold is projected to be $1,311.71 , soit is expected to be around the current level (when we write this Gold NewsMonitor, the price of gold amounts to $1,320.70). It implies a modest increaseof 1.8 percent compared to the average price in the first half of January 2019(when the forecasts have been done), and higher jump of 3.4 percent from theaverage price in 2018. However, the projected trading range for gold is between$1,150 and $1,475, or $325. So, prepare yourself for a really interestingyear for the gold market!
There arewide spreads across other preciousmetals as well.In particular, the average price of palladium is forecasted to be $1,267.68. It implies a fall of 1.5 percent, but thefigure is overshadowed by a $815 trading range (from $900 to 1,715). The spreadsuggests that 2019 might be turbulent for palladium. The analysts are morebullish on silver, forecasting a 4.2 percent increase in its averageprice to $16.28. However, it is platinum which is expected to be the best performing fourmetals. The experts project its average price to increase 5.1 percent to$850.71.
Bullish Case for Gold
Theanalysts formulated many arguments justifying their views, both bullish and bearish. Let’s list the most commonlypresented, starting from the former group:
Fed’s more dovish stance of monetary policy,Lower Treasury yields;Weaker US dollar;Stock market volatility;The US economic cycle matures, pushing investors into safe-haven assets.In short,more dovish US monetary policy, combining with maturing economic cycles andrising inflation and the risk of recession, should strengthen gold.
Bearish Case for Gold
Now,let’s turn to the bearish points:
Strong US economy;The Fed’s more dovish stance will be short-lived;The end of trade wars between China and the US will erases uncertainty and revive investment in risky assets;Subdued inflation and positive real interest rates.Thebearish case can be summarized as follows: the US economy will continue itsexpansion and the Fed will resume its tightening in the second half of theyear. As inflation will remain curbed, the real interest rates will increase.All the current downside risks, such as trade wars or Brexit, will recede.
Our Take on Gold Pricesin 2019
We havejust presented to you some bullish and bearish arguments made by several topexperts. Which convince you more? When it comes to us, we believe that gold bullshave a stronger hand now. As we explained in the January edition of the Market Overview, a scaling back of Fed rate hike expectations should translate into weakergreenback and lower interest rates.
Pleasekeep in mind that these macro factors are key drivers for the gold market andthey were headwinds in 2018. But this year, they are likely to ease. Inparticular, a strong US dollar prevented rally in goldprices, despiteotherwise positive macroeconomic environment. But the greenback might be peaking and running out of steam.Moreover, the ECB could start normalization of its monetary policy inthe second half of 2019, or this is at least what investors could start toanticipate and price in. Such expectations should also push the dollar lower, whilestrengthening the gold prices.
To beclear, we are bullish at the margin. It means that we do believe that fundamentaloutlook for gold is better this year than in 2018. Actually, the LBMA’sforecasters might underestimate the gold’s upward potential. But it does notnecessarily imply that we will see a sustained gold bull market. We rather expectassets rebalancing toward gold. You see, for the yellow metal to truly breakout higher, we would need a serious economic slowdown in the US, or evendownturn, and the FOMC would have to begin cut interest rates again.
Anyway,the recent gold price strength is encouraging (but investors should rememberthat January is consistently one of the best months for the yellow metal), andwe remain fundamentally bullish. If our outlook changes, we will inform youimmediately.
Thank you.
Ifyou enjoyed the above analysis and would you like to know more about the linkbetween the U.S. economy and the gold market, we invite you to read the August MarketOverview report. If you're interested in the detailed price analysis andprice projections with targets, we invite you to sign up for our Gold & SilverTrading Alerts . If you're not ready to subscribe at this time, we inviteyou to sign up for our goldnewsletter and stay up-to-date with our latest free articles. It's freeand you can unsubscribe anytime.
Arkadiusz Sieron
Sunshine Profits‘ MarketOverview Editor
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