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Natixis Sees Gold Averaging $1,150 An Ounce In 2015, Down 9.1% From 2014

By Neils Christensen of Kitco News
Monday March 30, 2015 1:18 PM

(Kitco News) - The gold market is expected to continue to struggle in 2015 on the back of a surging U.S. dollar as the Federal Reserve prepares to normalize rates, a stark contrast to other major central banks, according to the latest research from Natixis.

Nic Brown, head of commodity research, and Bernard Dahdah, precious metals analyst, at the French-based bank, published their latest commodity outlook report for 2015, providing a few price target scenarios for the yellow metal. The firm’s base-case scenario is for gold to average $1,150 an ounce this year and $1,055 an ounce in 2016.

However, in their worst-case scenario, the analysts see gold prices averaging $1,050 an ounce in 2015, which could mean that fourth-quarter gold prices could fall as low as $950 an ounce; they also see gold averaging $825 an ounce in 2016. In the bank’s best-case scenario gold could average $1,350 an ounce this year and $1,600 an ounce in 2016.

Unfortunately, analysts saw mostly risks to the gold market as potential Fed rate hikes, and strength in the U.S. dollar, reduce the need for gold as a safe-haven asset; higher interest rates boost bond yields, increasing gold opportunity costs and more investor outflows.

Looking at investor demand, analysts said that in March, as the U.S. Dollar Index reached 100, global gold-backed exchange-traded products (ETP) saw outflows of 50 tonnes. They add that ETPs will continue to remain a source of supply for the marketplace.
“We would not be surprised to see a slight acceleration in outflows as U.S. interest rates rise,” they said.

The analysts also don’t expect to see a lot of demand coming from Asia, which has played an important role in support gold during sharp price drops. Looking to India, unless the government reduces its 10% gold tariffs, imports should remain muted this year.

“We expect Asian demand to remain at weaker levels than in previous years,” they said. “Chinese demand for gold is not expected to grow.”

Central banks may take more of an interest in the yellow metal as more countries look at repatriating their international reserves, but the Natixis analysts add that they don’t see significant outright purchase, expecting central bank gold demand to be market neutral.

The only potential analysts see for gold in 2015 is as a safe-haven asset in the face of geopolitical uncertainty as Europe and Greece continue to inch towards a “disorderly” exit, increased Russian aggression and other sovereign defaults because of weaker oil prices.


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By Neils Christensen of Kitco News; nchristensen@kitco.com
Follow Neils Christensen @neils_C

 

 

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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