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Credit Suisse Looks For $1,313/Oz Gold In Second Half

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(Kitco News) - Credit Suisse has trimmed its gold forecast for the remainder of 2017 but still maintains a bullish outlook, looking for prices to rise from current levels.

Analysts now see $1,313-an-ounce gold in the second half, compared to $1,388 previously. The full-year forecast was cut to $1,276 from $1,323.

“In our view, recent softness in the gold price has been driven by [around] 16 million ounces of net Comex selling since June as real rates have risen on the Fed's signal that it could announce the tapering of repurchases of maturing treasuries with its September meeting, sending nominal rates higher, while inflation data has disappointed,” said an outlook released by Credit Suisse late Monday. “Our constructive gold thesis continues to be driven by U.S. real rates surprising to the downside, USD [U.S. dollar] strength waning, dovish central bank approach to future monetary policy, continued robust Chinese investment demand, elevated probability of a disruptive geopolitical event, and positioning in gold, which has turned relatively bearish.”

Analysts said the gold market should no longer be as dependent on massive exchange-traded-fund demand as in the past.

“This played out in Q1 with a market deficit driven by significant lower recycling supply and strong bar and coin hoarding from China,” Credit Suisse said. “In 2017 we forecast mine supply declining ~3% (-96t), geopolitical uncertainty and wealth preservation stoking bar hoarding, and we expect jewelry demand to recovery marginally from a very weak 2016.”

Credit Suisse also trimmed its silver forecast due to the metal’s correlation with gold, but likewise looks for this metal to rise. The bank is now forecasting $17.50-per-ounce silver in the second half compared to $18.90 previously.

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