Gold To Suffer By Year-End, 2016 Due To U.S. Rate Hikes - Top Gold Forecaster
Wednesday October 07, 2015 13:35
(Kitco News) - As market volatility continues with expectations of a 2015 U.S. interest rate hike still up in the air, one analyst -- deemed one of the most-accurate precious metals forecasters -- gives his year-end and 2016 forecasts for gold, which aren’t quite bullish.
“We maintain our gold forecast at $1,050/oz for end-2015,” said Barnabas Gan, commodity economist for Oversea-Chinese Banking Corporation Limited (OCBC), in a research note Wednesday.
“The bearish view is largely underpinned by our expectation for the U.S. Federal Reserve to inject a 25bps rate hike in 2015,” he explained.
Gold prices lost moderate gains on Wednesday, after hitting a two-week high of $1153.60. December gold futures were last quoted down 0.15% at $1,144.70 an ounce.
According to Gan, gold futures are to stay weak into 2016, falling roughly 10% to $950 an ounce for two main reasons: the metal will lose its safe-haven appeal on better economic prospects, and because increased U.S. interest rates will hurt gold demand given its “zero-interest yielding nature.”
“[T]he precious metal complex may likely see an interesting divergence into 2016,” Gan continued.
“However, for palladium and platinum, which have their holds in global manufacturing uses, are undoubtedly classified loosely as rather quasi-precious-industrial metals, may rally in tandem with global growth prospects, though not as strong as its distant base-metal cousins,” he noted.
For silver, Gan said that given the metal’s historic correlation to gold, it should “effectively cap silver’s climb potential into 2016.”
“It is increasingly vital to consider how gold may behave into year-end especially as the window for a hike inches narrower every coming day.”
Gan also said that he expect WTI and Brent to end 2015 at around $45-50 a barrel and $50-55 a barrel, respectively. He also expects cooper to remain weak on slower growth out of China and declining commodity consumption.