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Average Gold Price Seen At $1,200/Oz In 2015, Silver At $17/Oz - Commerzbank

By Kitco News
Tuesday December 2, 2014 11:48 AM

(Kitco News) - Gold prices are expected average $1,200 an ounce in 2015, as the metal sees weakness in the first half of the year ahead of expected interest rate hikes in the U.S., but rebounds in the second half of the year, said a German bank Tuesday.

Average 2015 silver prices are seen at $17 an ounce, with the metal following gold’s lead, said Commerzbank in its 2015 outlook for metals prices. Platinum prices are forecast to average $1,250 and palladium $790.

“As the interest rate turnaround draws ever closer in the U.S., gold is likely to find itself under pressure in the first half of the year. Growing volatility on the U.S. equity markets in the wake of the Fed’s (Federal Reserve) interest rate hikes and stronger physical demand in Asia should give rise to recovering prices in the second six months of the year,” they said.

Commerzbank said they expect gold prices will hit bottom when the Fed begins its cycle of interest rate hikes in the second quarter.

“We envisage the price falling to $1,125 per troy ounce on average in the second quarter, though a gold price of below $1,100 is also conceivable for a time. Once the interest rate hikes are under way, the pressure on the gold price is likely to abate, as was the case during the Fed’s last series of interest rate hikes between 2004 and 2006,” they said.

The bank said they expect rates to rise at the same moderate pace of 25 basis points per meeting, much as they did 11 years ago.

“By the end of 2015, the gold price should climb to $1,250 per troy ounce, finding support from reviving demand in China and inflows into gold ETFs (exchange-traded funds). Any deviation by the Fed from this assumed course of action poses the greatest risk to this forecast,” they said.

As it usually does, silver is likely to mirror gold’s action, they said.

“Although demand for coins and bars, which this year has been weak, should profit from the low price level, subdued industrial demand and rising mining production are likely to preclude any more robust price performance,” Commerzbank said.
By mid-2015, silver is expected to trade at $16, and at $18 by the end of the year, the bank said.

Supply of platinum and palladium remains very tight. Platinum supplies from South Africa are much lower because of the strike at the beginning of this year, but for next year supplies are expected to rebound. However, investor demand is expected to be down, but this is likely to be offset by demand from the auto industry, they said.

They forecast that by the end of 2015, platinum prices will be at $1,300.

Tight South African supplies and less supply from Russia affect palladium, Commerzbank said.  Auto demand is expected to stay strong, with the trend of using palladium in diesel engines expected to continue. They caution that investment demand will not be as robust next year as it was this year, especially after the strong demand seen in 2014.

By the end of the year, they forecast palladium around $850.

“The main risk factor for palladium next year will be investment demand: this year’s sharp fall in investment demand for platinum highlights what could happen next year to palladium. After all, the decline started out from a level that is comparable to this year’s palladium level and was likewise boosted by the issue of a new ETF in South Africa.... The stagnation in palladium ETF holdings since mid-2014 illustrates that this assumption is not overly pessimistic. Significantly lower investment demand in 2015 would probably ensure that the palladium supply deficit next year is considerably lower,” they said.

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By Debbie Carlson dcarlson@kitco.com
Follow me on Twitter @dcarlsonkitco



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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