Kitco News Gold Survey: Gold Prices To Shine In 2018
(Kitco News) - Wall Street and Main Street figure 2018 will be another good year for gold prices.
Instead asking for short-term outlooks, this week’s Kitco gold survey asked Main Street and Wall Street participants alike where they see gold finishing 2018. Both camps looked for gold to build on its roughly 13% gain for 2017.
Gold was just above $1,300 an ounce mid-morning on Friday, the final trading day of 2017. Assuming prices end 2017 right around here, then of the 1,527 votes cast in the online survey, 975 respondents – or 64% -- called for gold to rise in 2018.
There were 360 votes, or 24%, calling for gold to be above $1,500 an ounce when 2018 winds down. Another 264, or 17%, see the metal between $1,400 and $1,499, while 351, or 23%, said between $1,300 and $1,399.
Meanwhile, 82 Main Street voters, or 5%, see gold between $1,200 and $1,299. Twenty-six, or 2%, said between $1,100 and $1,199. More than a quarter of voters -- 444, or 29% -- are even more bearish, calling for the metal to end 2018 below $1,100.
A Kitco reader named Mahmood said he sees gold above $1,500 due to rising inflation and a softening U.S. dollar.
“The second reason from my point of view is that the U.S. stock prices have risen up, breaking record after record in continuous sessions during 2017 and based on the dividend paid per stock, the prices have reached their logical limit and some aggressive correction for prices will take place, and this might drive some investors to allocate their investments from stocks to gold, building a strong demand-based momentum for gold,” the reader said. Further, he suggested cryptocurrencies will fall in value as they become more strictly regulated, sending investors into other safe havens like gold.
Meanwhile, 15 of 23 views from Wall Street – or 65% -- called for gold to finish higher in 2018. Besides the traders and analysts who take part in the weekly gold survey, Kitco News also included the views of a number of investment banks who shared their outlook reports.
There were seven Wall Street votes, or 30%, for lower gold prices in 2018. One participant, or 4%, called for gold to end next year right around where it is ending this year.
Adrian Day, chairman and chief executive officer of Adrian Day Asset Management, sees gold ending 2018 around $1,397 an ounce. He said the Federal Reserve’s expected monetary tightening is already discounted into prices, and likely to be “modest and slow,” thereby supporting gold.
Day also commented that Europe “could get messy again” due to trade negotiations over Brexit, a uncertain German government, “growing stridency by Poland and Hungry to the annoyance of France and Germany,” Italian elections and more Greek debt talks. Further, several geopolitical hotspots persist, including North Korean, the Middle East, Russia and a U.S.-supported Ukraine, and ongoing tensions with China over the South China Sea. Also, he continued, an “overheated” stock market is likely to have a correction by mid-2018.
“Given the overvaluation and air in many high flyers, the pullback could be severe, helping gold as a hedge,” Day concluded.
Commerzbank is also constructive on the yellow metal.
“Real interest rates remain at a low – and in some cases negative – level,” analysts said in their outlook. “The opportunity costs of holding gold thus remain close to zero or indeed negative, which points to stronger investment demand in the West. Numerous political uncertainty factors in Europe and the U.S., as well as a number of potential sources of geopolitical crisis, are likely to boost demand for gold additionally. The gold price is likely to rise during the course of the year and to be trading at $1,350 per troy ounce by the end of 2018.”
Ronald-Peter Stoeferle, fund manager at Incrementum AG and author of the annual “In Gold We Trust” report, sees gold rising to $1,500.
“We expect – also due to the base effect – rising inflation rates and falling real rates. Moreover, geopolitical risks are underpriced at the moment,“ he said. “Gold made it’s lows end-2015 and since then formed a solid bottom… second stage – according to Dow Theory – is public participation phase and we are currently at the beginning of this phase. Gold did tremendously well even though it faced massive headwinds (soaring equities and real estate, rising Fed fund rates, relatively low inflation, faith in central banks and politicians). As soon as those headwinds become tailwinds (falling rate expectations, falling equities), gold will pick up momentum!“
Goldman Sachs is among the bears. In the bank’s outlook, analysts listed a 12-month forecast of $1,225 an ounce. Goldman, which then looks for a rise to $1,375 by the end of 2020, listed three main factors behind its near-term bearish view: continued robust economic growth in developed-market nations, “the market moving closer to pricing in our view of four cumulative Fed hikes in each of 2018 and 2019,” and neither a deterioration in geopolitical risks nor a recession in 2018-19.
“I expect 2018 will be a difficult year for gold,” said Adam Button, chief currency analyst with ForexLive.com. “Better global growth and higher interest rates will weigh on prices starting in Q2, with gold finishing the year at $1,050.”
Philip Wang, director of content production with IGVision International Corp. Shanghai, was the respondent who figures gold could end next year not far from where it is now.
“In light of a resilient U.S. dollar as a rate increase from the European Central Bank is not expected at least until mid-2019, and favorable corporate earnings that would keep equity valuations elevated partially as a result of U.S. tax cuts, as well as rising real rates resulting from continued Fed rate hikes and subdued U.S. inflation, the gold price is unlikely to stay above $1,300 on a sustained basis,” he said.
“On the other hand, investor concerns over higher U.S. deficits and government debt, a possible sharp correction in U.S. equities, and an unexpected geopolitical flare-up are there to stay. Also, bargain hunting may start to kick in and robust physical demand out of China and India may begin to resurface….As higher U.S. interest rates become more difficult to justify after three more rate increases by the Fed and seasonal factors start to kick in at the end of 2018, the market could be approaching the $1,300 level by year-end and spike above this resistance level in early 2019.”
Here is a sampling of thoughts from Kitco readers commenting Kitco Chat: