Majors

Precious Metal Analysts Up Price Predictions for 2016

MajorsAug 03, 2016

Precious Metal Analysts Up Price Predictions for 2016

Thomson Reuters recently revised its fourth quarter and full year forecast for gold and silver upward. Here’s why.

2016_gold-bars.jpg
The price of gold started climbing after the June 23 Brexit vote and has remained above $1,300 since, spurring Thomson Reuters to revise its forecast upward for the year. (Photo credit: United Precious Metals)

New York--Thomson Reuters recently revised its fourth quarter forecast for gold and silver upward following the unexpected outcome of the Brexit vote in the United Kingdom.

Erica Rannestad, a senior analyst for Thomson Reuters GFMS who is based in Chicago, said initially, analysts expected gold prices to drop in the third quarter.

In a forecast released in April, Thomson Reuters had gold averaging $1,200 in the third quarter and $1,250 in the fourth quarter.

However, Rannestad said the market did not anticipate that the U.K. would vote in favor of Brexit and, thereby, did not factor into their forecasts the volatility spurred by a “leave” vote.

All year, people have been buying gold as a “safe haven” asset due to the global economic situation, which has been pushing up the price. The Brexit vote just added to the desire for a safe haven investment, she said.

Kitco data shows that after remaining in the $1,200 to $1,300 range for much of the year, the gold price jumped from $1,262 on June 23, the day of the Brexit vote, to $1,315 the following day.

Though it’s been up and down, the price of gold has remained above $1,300 since then, averaging $1,337 an ounce in the month of July, up from $1,276 in June, according to Kitco.

Thomson Reuters has revised its forecast for the third quarter upward to an average of $1,310 and for the fourth quarter to $1,365, with more volatility expected around the highly emotional U.S. presidential election.

For the year, Thomson Reuters now expects gold to average $1,279 an ounce, up from its earlier forecast of $1,212.

Dave Siminski, of United Precious Metals, is even more bullish on gold for the year. He said he expects the metal to finish the year averaging about $1,375 an ounce.

So, which outcome--a Hillary Clinton victory or a Donald Trump victory--will have a greater impact on gold prices?

Rannestad could not say, as there are arguments for both candidates spurring volatility. “It depends on the level of uncertainty the market sees in the outcome,” she said. “I’m not really sure how the market really perceives the two candidates in terms of who would be bad or good (for gold prices).”

Silver, as is typical, has shadowed gold throughout the year and that is expected to continue.

The metal’s price has risen steadily throughout 2016, starting out the year around $15 an ounce and increasing to more than $20.

Thomson Reuters

now expects silver to average $19.20 in the fourth quarter, up from its earlier forecast of $16.80, and finish the year at $17.24, up from $15.91.

Siminski puts silver at $19.74 for the year.

Thomson Reuters’ forecast for platinum remains unchanged from April.

The metal’s predicted to average $1,060 in the fourth quarter and $1,005.06 for the year. It will remain below gold for the foreseeable future.

Demand for platinum in the auto market is steady but not outstanding. Jewelry has been impacted by the slowdown in demand in China, the world’s largest consumer of platinum jewelry. Despite this, mining companies are not cutting back on production as much as they need to, creating an oversupply in the market.

“It’s just this bad supply/demand situation for platinum,” Rannestad said.

The Thomson Reuters forecast for palladium also remains unchanged. The other white metal is expected to average $594.89 an ounce in 2016.

Siminski, again, is slightly more bullish in his forecast. He sees platinum averaging $1,055 for the year and puts palladium at about $695.

Michelle Graffis the editor-in-chief at National Jeweler, directing the publication’s coverage both online and in print.

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