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Commerzbank Sees $1,150/Oz Gold In 4Q, Sustained Rise Once Fed Uncertainty Dissipates

(Kitco News) - Commerzbank looks for gold to average $1,150 an ounce in the fourth quarter and rise to $1,200 in the first two quarters of 2016, suggesting that sustained price rises may not occur until uncertainty about the first U.S. interest-rate hike goes away.

Gold hit four-month highs at the end of last week, boosted by fading expectations of a Federal Reserve interest-rate hike yet in 2015, which in turn undermined the U.S. dollar, Commerzbank says.

“Since according to the Fed fund futures, the probability of a rate hike before year’s end is now only slight, the gold price could come under renewed pressure in the run-up to the Fed’s meeting in December,” Commerzbank said. “We only envisage a sustained price rise once the uncertainty over the first rate hike has dissipated.”

Should U.S. economic data start coming out strong again, this could once again start to increase expectations for monetary tightening by the Fed, Commerzbank said.

Analysts said they look for strong gold demand from China after the collapse of the country’s stock market this summer but probably “somewhat weaker” demand than past years in India as a result of a poor monsoon season. The monsoon impacts incomes of rural Indians and consequently their ability to buy gold.

Commerzbank pointed out that global exchange-traded-fund holdings of gold fell during the third quarter, but U.S. Mint coin sales were strong. Also, central banks remained net buyers largely due to purchases by Russia and China.
 
The bank said the price of silver may hinge on price trends in gold, although adding that the high level of speculative net-long positioning means the risk of selling to capture profits. Commerzbank looks for $16 silver in the fourth quarter and $16.50 in the first two quarters of 2016.

Meanwhile, Commerzbank analysts said “we regard the current price level of platinum as too low” and expect prices to rise in the coming months.

“Platinum production is barely profitable anymore,” Commerzbank said. “Some platinum producers
such as Lonmin and Glencore have already announced and/or implemented cutbacks on production. Others are likely to follow if the price fails to recover significantly.”

The bank forecast average platinum prices of $1,050 in the fourth quarter, then $1,100 in the first quarter of 2016 and $1,150 in the second quarter. Palladium was forecast at $700 for the fourth quarter and $725 and $750 in the first two quarters of next year.

Price action diverged in these metals in recent weeks after the Volkswagen emissions scandal, with platinum (used in diesel-powered cars) declining while palladium (used in gasoline-powered vehicles) rising due to demand expectations. Overall, however, demand from the automobile sector should remain “robust,” Commerzbank said.

“Moreover, the VW emissions scandal may raise the awareness among car producers to reduce emissions, which would argue for increased use of platinum and palladium,” the bank said.

By Allen Sykora of Kitco News; asykora@kitco.com

 

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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