Gold, Silver, Platinum Not To Fly 'Too Close To The Sun' In 2018 - TD Securities
(Kitco News) - After a decent year, the commodity complex is looking at solid gains in 2018, but its rally won’t push prices “too close to the sun,” so as to burn out too quickly, according to TD Securities’ outlook for next year.
“Following a respectable performance this year and despite the long-in-the-tooth expansion, the commodity complex rally is in no danger of following the fabled Icarus too close to the sun in 2018,” TD Securities said.
Precious metals, in particular gold, have been stuck in a narrow trading range for more than a month now. And any future metal gains are likely to be capped by the U.S. monetary policy as well as the uncertainty surrounding the Federal Reserve’s future leadership, the bank specified.
“Balance sheet reductions, likely Fed hikes in December and mid-2018, stellar equity markets and . . . Fed’s new leadership will all likely continue to conspire to place a ceiling above precious metals for the balance of 2017,” economists at TD Securities said.
Another key factor limiting precious metals gains will be the passage of Trump’s promised tax reform.
“Robust tax reduction legislation . . . could accelerate economic growth and possibly lead to a higher-than-anticipated interest-rate environment and still firmer equity markets, are an additional set of factors limiting the upside for gold and its peers,” the report said.
Overall, the bank estimates for gold to trade at $1,300 an ounce during the first half of 2018 and then rise to $1,325 in the second half of the year.
This advance would mean that gold would finally break its key psychological level of $1,300 only by mid-2018, according to TD Securities.
December Comex gold was last seen trading at $1,279.50, up 0.33% on the day.
The bank added that it sees silver outperforming other precious metals next year, advising investors to go long with a price target at $20 an ounce.
“If the US tax reform proposals are passed in their current form they will massively expand the U.S. debt in absolute and relative terms. And, higher debt-to-GDP ratios have traditionally been gold and precious metals supportive. Considering silver's traditionally higher volatility and strength during periods in which investors are positive on gold, silver should outperform,” the report pointed out.
Economists also project for platinum to outperform gold for similar reasons as well and rise to $1,100 an ounce by Q4 2018.
“The highly gold-correlated platinum may also get a boost from a more robust gold market into 2018, as the Fed is unlikely to tighten as much as the dot plots suggest and investors look to diversify away from risk assets such as the highly valued equities,” the bank noted.