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Gold Prices To Average $1,235 In 2018 – Natixis

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(Kitco News) - Gold investors will have to wait until the second half of 2018 to see a further recovery in gold prices, according to Natixis.

The France-based bank said in its 2018 outlook, published Wednesday, that gold prices will struggle in the next 12 months as global real interest rates rise through the first half of next year.

In its report, the analysts said that they expect gold prices averaging $1,235 an ounce, with a market high of $1,350 an ounce and a low of $1,270 an ounce. By 2019, the bank sees prices averaging $1,270 an ounce with a high of $1,450 and a low of $1,150. Natixis expects gold prices to average $1,254 an ounce this year.

December gold futures last traded at $1.290 an ounce, down 0.26% on the day.

“Gold prices are expected to come under further pressure in the first half of 2018 as result of two US rate hikes. That said, from the second half on the year, we should expect a slow recovery in prices that will continue into 2019. This will be driven by the end of US rate hikes and further drops in gold mine output,” the bank said.

The French bank is also optimistic on silver, but sees more risk in the volatility market. The analysts expect silver prices to average next year at $15.90 an ounce with a high of $17.80 and a low of $14. In 2019, the bank expects the price to average $16.50 an ounce, with a market high of $18.70 and a low of $15.

Silver prices last traded at $17.12 an ounce, down 0.51% on the day.

“Our primary concern for silver stems from the substantial amount of silver held in physically backed ETFs. Should an event trigger an outflow, then we could see a sharp drop in prices,” the analysts said.

Not only will the precious metals market have to deal with higher real interest rates, which raises the opportunity costs of holding gold and silver, but the analysts warn that they are expecting to see a drop in safe-haven demand.

“As the global economy continues to recover, so the need for a safe haven diminishes,” they said. “Investor demand which accounted for around 8% of total demand for gold rose to around 23% back in 2012. We continue to believe that as the recovery continues to take place so demand for the metal from western investors will drop and leave a gap in the demand side.”

A major bright spot for gold will be the supply side, with Natixis expecting mining output to decline. The analysts noted that global gold production fell 1.1% in the first half of 2017 and it is just the start of a longer-term trend.

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 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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